Insolvencies on the increase

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Bag of money

Johannsburg - The number of insolvencies increased year-on-year in January to 14 percent, FNB data revealed on Tuesday.

“The return to an increase in insolvencies has long been anticipated, after having observed a diminishing rate of decline through most of 2012, as well as having witnessed slowing disposable income growth in line with a slowdown in economic growth,” household and property sector strategist John Loos said in a statement.

“The monthly number, however, can be volatile, so we prefer to use a three month moving average, which showed a lesser rise of +0.16 percent year-on-year, suggesting that insolvencies had at least stabilised after a lengthy declining trend.”

The bank expected a mild rise in the household sector debt-service ratio, and consequently in the level of insolvencies.

“This is based on our expectation that interest rates will be raised moderately to where prime rate ends 2014 on 10 percent and 2015 on 11 percent.”


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