In a slowly recovering economy, the prognosis for UK’s financial industry is still somewhat mixed. While the write-offs of mortgage arrears appears to be leveling out, write-offs on credit card debts reached one of the highest figures ever recorded.
Bank of England is reporting that banks and other financial institutions were forced to write off around £1.25 billion in the first quarter 2010 - second on the list of all time highs. This comes after some £4.12 billion in credit were written off last year.
According to the Bank, theses write offs have led to higher margins being charged on credit card lending. Figures published by the bank reveal that the average rate on a UK credit card stood at a relatively high 16.5%.
However, British property owners seem to be in better financial health, the mortgage industry reporting write offs to the tune of £160 million, an 18 month low.
With mortgage interest rates at an all time low, and house prices stable or rising, cases of repossession decreased by 7.5%, from 10,600 to 9,800, compared to the previous quarter. The Bank’s base rate also fell from 5.75% to 0.5% - with many borrowers also enjoying reduced mortgage rates and more affordable remortgage deals.
Talking about the credit card issue, Steven Law, president of insolvency practitioners group R3, said there are now nearly a million borrowers in the UK having a difficult time.
He warned that while these problems might be resolved without outside help, there is a risk that it might “snowball out of control”.’
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