The number of households in personal debt default is set to increase to 3.8 million by the end of 2022, according to a forecast by debt purchaser Arrow Global.
Arrow’s prediction is based on figures from the Office for Budget Responsibility (OBR), which showed that around 3.3 million households defaulted on their debt by the end of 2017.
The 500,000 increase is expected despite a slight dip in the total in 2019 and 2020, Arrow’s analysis showed, due to the lagged effect of the post-Brexit referendum bank base-rate cut and subdued unemployment. It will then resume an upwards trajectory to reach 3.8 million by the end of 2022.
From 2020 onwards, Arrow expects mortgage possessions to rise more sharply as the recent base-rate increase and future rises push up borrowers’ costs.
The forecast also looks at the impact on default levels if the Bank of England increases the bank base rate at a faster rate than currently projected. If it is 0.5 percent higher than the OBR forecast, an additional 250,000 households will default by 2021.
Lee Rochford, group chief executive of Arrow Global said: “While some debt default is to be expected due to changes in personal circumstances and economic factors, it is startling that an increase in the bank base rate by only 0.5 percent could lead quarter of a million more households to default.
“It is vital that people with debt problems are provided with support and as a responsible credit management services provider, we focus on helping people manage and repay their debt in a sustainable way.”