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House price hikes 'fuelling bankruptcy rates'

Rising house prices, high interest rates and increasing credit card bills mean that more Australians than ever before could be made bankrupt during 2008, a new study has found.

Statistics from Insolvency & Trustee Service Australia (ITSA) reveal that bankruptcies are increasing in many parts of the country, despite slight respites in New South Wales and Victoria.

Between January and March this year, 6,306 people applied successfully for bankruptcy across the country – a rise of 0.62 per cent on the previous three months.

Increasing interest rates and record-high personal debts – including loans and credit card bills – have been blamed on the rise in bankruptcies.

However, in Victoria insolvencies dropped by 11.16 per cent during the first three months of 2008, bucking the national trend.

The researchers pointed out that during the last quarter of 2007, requests and applications for home loans increased nationally by $13.1 billion, adding to the debt taken on by many consumers.

Paul Leroy, insolvency partner with national accounting firm Hall Chadwick, said: "It is clear we are fast becoming a nation of borrowers, who 'live now, pay later' and need to cut down on using credit cards. Such a credit dependent society is painting a gloomy picture for 2009.

"In an age when people are relying more and more on credit, something has to happen, we can't continue to raise debt levels without long term consequences."

Recent research by the Australian Bureau of Statistics found that high inflation could add to the increased financial strains being seen across the country.

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