Could rising property prices help to combat bad debts?

Over the past year banks in the UK have seen a massive rise in bad debts, with many households and individuals unable to keep up with repayments on credit cards and loans. In fact, last year saw the number of people in the UK that went insolvent break the one hundred thousand barrier for the first time, providing an indication of the levels of unmanageable consumer debt in the UK and also providing an insight into the situation that banks will have to face in the coming years. Many banks have already taken a firmer stance due to rising bad debts, with many being far more stringent with regards to who they will lend money to.

However, for some people there could be an effective solution to clearing those unmanageable unsecured debts, which could ease the situation for the consumer in that their credit rating won't take such a hit and they won't have to put up with hassle from creditors, and would of course make the banks very happy. This is due to the rocketing property prices in the UK, which have left many homeowners with a tidy nest egg tied up in their property in the form of equity.

Due to rising property prices in the UK those with homes and mortgages could cash in and borrow against the equity in their homes, freeing up some of the cash that is otherwise tied up in the property. This would enable the borrower to enjoy longer repayment periods and lower interest rates, thus keeping down monthly repayments, and would allow them to consolidate their unsecured loans and clear them, which would mean fewer bad debts for the banks and less complication and hassle for the borrower. Unfortunately, those without mortgages and homes through which to draw on equity will need to look at other solutions, and it is likely that many of the bad debts that banks have been left with could come from those without homes and with far fewer options when it comes to finding a solution to repay their credit.