Little relief on homeowner insolvency

The number of Scottish homeowners being declared bankrupt reached the second highest level on record in 2010, according to analysis published today.

It was revealed this week that 20,329 Scots went bust last year, more than 3,000 fewer than the record level of 2009 but three times the level 10 years ago.

The figure included 4,583 in the last three months of the year, down 11.3 per cent on the previous quarter.

The drop in insolvencies was due primarily to a fall in the number of people taking advantage of the low income, low asset route into bankruptcy.

However the number of Scots taking out a protected trust deed (PTD) was, at 8,438, the second highest ever recorded. Of those taking out a PTD in 2010, 37 per cent were homeowners, according to new analysis by accountants and business advisers PKF.

PTDs tend to be taken out by relatively affluent people with assets and income and Bryan Jackson, corporate recovery partner at PKF, said any rise in interest rates would trigger a new wave of insolvencies among homeowners.

"There are likely to be thousands of homeowners in Scotland who are only just surviving due to the record low interest rates. Once these rates start to rise I believe that we will see a wave of personal insolvencies among this group in society as they struggle to meet rising mortgage payments.

"The concern is that these numbers are quite high and have remained so for some years, indicating the recession is continuing to hit the more affluent in society," he said.

Jackson warned that the fall in insolvencies last year may prove to be the calm before the storm.

"If interest rates had been at their 10-year average then I have little doubt that we would have seen much more widespread personal insolvency, a collapse in the housing market, and an even greater downturn in the economy."

Scotland's underlying personal debt problem means the country faces high levels of bankruptcy for several years to come, Jackson predicted.