'Middle class IVAs' on the up

06/02/2009

The number of homeowners applying for an Individual Voluntary Arrangement (IVA) was on the up in the second half of 2008, as the economic downturn tightened its grip.

Accountants Grant Thornton said that, of the total applications for last year, 70 per cent of those received during the July-December period came from homeowners.

This total stood at just 58 per cent for January -June - showing that mortgage repayments are becoming a source of particular strain.

Mark Allen, head of IVAs at Grant Thornton, said: "These figures give a bleak indication of the number of homeowners who are now defaulting on their mortgage repayments. We're seeing growing numbers of better-off people contacting us about IVAs.

"These individuals with debt have always existed but they are now becoming the majority of people approaching us for help. The 'middle class IVA' is becoming increasingly common."

Kevin Still, EuroDebt director, added: “The removal of so many secured lending products and the tighter lending criteria has meant that homeowners traditionally able to use equity release as a temporary fix to growing levels of indebtedness are no longer able to do this and need to look at longer term non-borrowing debt solutions like IVAs and Debt Management Plans.

"Not only are we seeing more homeowners starting Debt Management Plans, but the levels of unsecured debts from middle class homeowners tends to be very high. It is now not unusual to see unsecured debts over £100,000 with over 10 creditors."

According to government figures, the UK officially fell into recession at the end of 2008.

The stats showed that the economy was shrinking at its quickest rate for 30 years in October-December last year.

Tags; Housing Debt and Bills, Young Family Finances,

Regional Debt Advice; Debt Advice Thornton,

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