The amount of UK debt being written off is soaring
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The amount of debt that was written off because defaulting borrowers could never repay it increased hugely in 2009 according to new figures from the Bank of England (BoE).
The figures show that £4.1 billion of credit card debt was written off in 2009, compared to £3.2 billion in 2008. This represents an increase of 30% on what was already a record amount in 2008.
Meanwhile, the value of mortgage debt written off increased by more than 100%, from £408m in 2008 to £984m in 2009, although that increase was from a lower starting level.
The figures demonstrate the very serious effects of the recession on personal debt in the UK and how often lenders use this last resort shows their desperation, as well as that of the borrowers.
Besides credit cards and mortgage debts, other loans written off increased from £3.2bn to £4.2bn. This pushed up the total write-offs by UK lenders to individuals from £6.9bn to £9.3bn.
In addition to this, financial institutions wrote-off £5.9bn that was lent as business loans.
Banks have been revealing their own specific write-off levels during the current reporting season. The UK banks set aside millions of pounds to cover potential losses on their loans, but only when the loss is confirmed as unrecoverable is the money finally written off.
The main effects of the increased losses have been felt by those people who borrow but make repayments on time.
For example, it became more difficult during the recession for first-time buyers to get on the property ladder as lenders were making their criteria more stringent. Similarly, last month credit card rates rose to their highest level for 12 years, 18.8%.
The BoE figures suggest that the average rise was not so acute, but credit cards offered by banks and building societies have risen to their highest level since June 2006. At the end of January, the rate was 16.4%.
Borrowers who feel they are in a desperate position should be aware that lenders will not necessarily immediately write off debt. Most have processes in place that can take considerable time and will only write off debts when there is absolutely no chance of it being repaid.
