Bad loans to ‘continue rising’

A survey from the Confederation of British Industry has found that 30 per cent of banks and more than three-quarters (78 per cent) of businesses are to see a rise in the number of bad loans in the first three months of 2007.

The news follows reports that the financial services authority has suffered five-quarters growth in bad loans, with experts suggesting that the problem is likely to get worse.

John Hitchins, UK banking leader at PricewaterhouseCoopers, said: “We know there has been a problem with bad loans rising in 2006 and, while the majority think they have hit the peak, one third of banks are still saying they think it will keep rising because of the level of [personal] insolvencies.”

He adds that the main reason for people traditionally defaulting on loans is due to divorce or unemployment, but that people are now defaulting because they are unable to meet their debts.

Balance transfer deals are one way that consumers have been tackling their debts, with Moneyfacts stating that 70 per cent of credit card providers now allow custoemers to switch balances.

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