Falling house prices and low interest rates protect thousands from insolvency – Telegraph Blogs

Falling house prices and low interest rates protect thousands from insolvency – Telegraph Blogs

Falling house prices and low interest rates have combined to keep corporate and individual insolvencies lower than expected, according to leading accountants.

“With all the doom and gloom in the headlines, you might be surprised to hear that our insolvency department is not that busy,” said Mike Warburton of Grant Thornton. He added: “Low interest rates reduce the pressure on banks and other lenders to act quickly to prevent debts growing larger and limit their losses.

“At the same time, the weak housing market and difficulties in obtaining mortgages mean it is hard to sell houses, which are most debtors’ major asset; another reason for lenders to hold fire.

" So, paradoxically, we might not see a major increase in insolvencies until interest rates and house prices start to go up. Either or both of those trends might encourage lenders to pull the plug on over-extended borrowers.”

Mr Warburton was speaking ahead of the publication of official figures by the Insolvency Service, later today. RSM Tenon accountants went even further and predicted that the number of insolvencies will fall.