Two-fifths seeking debt help due to mortgage crunch

Forty per cent of those people now seeking debt help are struggling with their mortgage, according to new research.

Last week, official data showed a six per cent fall in the number of people going into bankruptcy or entering an individual voluntary arrangement (IVA).

However, KPMG predicts a rise in those struggling with debt.

The accountancy giant has seen consumers with a mortgage now make up 40 per cent of those seeking IVAs, a dramatic increase from the 30 per cent level seen until recently.

Currently the average debt for those taking on an IVA stands at £47,800, but over the last year more than 500 people entered into an IVA with debts in excess of £100,000.

Mark Sands, director of personal insolvency at KPMG, said: "As the first anniversary of the credit crunch approaches, consumers are seeing the cost of their mortgages continuing to eat up more of their income, energy costs are about to leap and food prices are rising in a manner not seen for years.

"More than 1 million homeowners face the end of cheap fixed rate deals this year, mortgage deals continue to be difficult to secure and unsecured lending has tighter restrictions than for many years."

Mr Sands went on to advise those facing to take advice about the best options open to them

"Whilst many individuals will have to take formal steps to deal with their over indebtedness in the months and years ahead, numerous others may be able to take advantage of informal arrangements and tighter budgeting