Bankruptcies are on the increase in the UK. Official figures revealed that a record number of people filed for bankruptcy in the last twelve months, and there is little doubt that the number will increase.

Figures from the Ministry of Justice showed that the total number of bankruptcy petitions was up to a new twelve-monthly high of 54,536 in the year to June. In the second quarter of the year the number was 13,384 which is an increase of 5% on the same period in 2006.

Financial pressure is mounting on home owners who have seen their mortgage interest rates rise over the last twelve month and the housing market begin to slow in recent months in response to the Bank of England’s rising base rate. The debt crisis which has caused stock markets across the world to plunge in the last week will make things worse as banks will become more reluctant to lend money to people to remortgage. Thus, people will be unable to borrow their way out of trouble. It looks like a very troublesome downward spiral is on its way.

In the previous few months there has been strong evidence that people have been shifting their credit card debt (which has been shrinking across the country) onto mortgage loans (still at lower interest rates than credit card rates), but that may no longer be possible.

Figures from accountancy firm KPMG say that the average bankrupt owes £46,587. Director of personal insolvency at KPMG, Mark Sands, said that bankruptcy had become a very easy option for people.

With stock market investors in flight, consumer confidence undoubtedly dented as a result, and the housing market stalling, maybe there will be a chink of light in coming weeks. Surely it is inconceivable in the new circumstances that the Bank of England will put the base rate up to 6%.