Bank of England figures show a total of £740m was written off in the third quarter of this year, quite a sharp fall and the lowest write-off amount since quarter one 2008.
This could be a glimmer of hope from people’s finances as this is significantly less than the record £2.1bn write-off in quarter two 2010. This mirrors a drop in personal insolvencies and home reposessions.
What are write-offs?
When it becomes clear to a bank that it’s customers cannot or will not repay money spent on their credit cards, a bank will normally write off the debt.
This amounts to around 10% of all outstanding lending on credit cards, and clearly displays the reason for the higher rate of interest on credit cards – a higher risk to the bank equals a higher interest rate.
What about Mortgages?
The amount of write-offs on mortgages also fell, although not as sharply as credit cards, from £184m in quarter-two 2010 to £134m in quarter-three.
Overall, across all forms of lending, write-offs have fallen from £3.5bn to £1.8bn.