London (Ask4loan) 4 January, 2008: Christmas spending is likely to increase the number of insolvencies in the first quarter of 2008. Grant Thornton, a UK based chartered accountant, predicts that out of 28,000 people likely to become insolvent in the first quarter of 2008, one-third are expected to file for bankruptcy as a direct result of debts raised during the festival season.
Mike Gerrard, head of the personal insolvency practice at Grant Thornton, said: "Sadly, many individuals spend up on credit at Christmas and pay no heed to the financial warning bells. Come January, they find themselves in a situation where previous financial woes are compounded by the bills arriving from the festive season and in these situations insolvency becomes the only way out."
The number of personal insolvencies may move forward at a faster pace than anticipated earlier. Tighter lending conditions and a total of 1.4 million cheap fixed-rate mortgage deals coming to an end in the beginning of the year will make the matter worse for the consumers. Many of those whose fixed rate mortgages are expiring would not be able to renew them at competitive rates. It is estimated that each will be forced to pay an average of 200 pounds extra per month to meet the cost of servicing their home loans.
After the credit crunch hit the financial markets in the UK, the secured loans, personal loans and mortgages have become costlier as well as hard to obtain. The lenders have tightened their loan conditions and borrowers having bad credit are virtually driven out of the market.