Insolvencies are set to rise in 2008. Pat Boyden of accountant giant PricewaterhouseCoopers told the BBC: "In the past people have borrowed their way out, but as the housing market becomes static this will be increasingly difficult."

Rising fuel bills, higher mortgages

The anticipated rise is due to rising fuel bills, increasing transport costs and council tax demands. The global credit crunch has impacted on the UK housing market, as house prices continue to fall and consumer confidence remains shaky. Homeowners coming off fixed-rate mortgages are thought to be most at risk to insolvency.

Insolvency increasingly popular

An IVA overseen by an insolvency practitioner is a deal between you and your creditors. Insolvency is an increasingly popular alternative to bankruptcy as a way to escape overwhelming debt as insolvency has less stigma attached to it. And unlike bankruptcy it's an attractive way out as you are not at risk of losing your assets, such as your house, to pay creditors.

Hard pressed homeowners

Although insolvency figures are predicted to hold for the first quarter of 2008, it's predicted there will be a sharp increase later in the year. PricewaterhouseCoopers told the BBC that the predicted build up of credit card debt from hard pressed homeowners juggling higher mortgage rates, increased fuel bills and a rise in food costs will all impact heavily on insolvency figures. Income levels are not rising as fast as the cost of living, and a backlog of individual voluntary arrangements is predicted to push up the insolvency figures even further.

‘Precious Plastic' – Credit card debt set to soar

In its annual report entitled Precious Plastic, PricewaterhouseCoopers states: "There could be a spike in personal insolvencies next year as a result of over-borrowing by consumers." Although official figures have seen the number of insolvencies in the UK fall in 2007 – down 5% from the previous year – it's expected over a million people coming off current fixed-rate mortgages will be at increased risk. Homeowners will have to pay up to £140 extra every month on their mortgages unless they can remortgage to a more competitive rate. As a result, more homeowners will turn to credit cards and could quickly spiral into overwhelming debt.