There is going to be further strain on consumer finances this year, according to Credit Action.

"If we look at the cost of credit going up and being harder to come by as well, in 2008 I think people's general financial situation is going to squeeze," Chris Tapp, director of national money education charity said.

The organisation reports that this could lead to an increase in the number of individual voluntary arrangement (IVA) applications as people seek help with their debts.

However, Mr Tapp claimed that this may not necessarily lead to a rise in the number of IVAs as changes to regulation may mean they are harder to come by.

The Insolvency Service has revealed that during the second quarter of 2007, there were 26,956 individual insolvencies in England and Wales, an 8.1 per cent decrease on the previous quarter and a 4.2 per cent increase on the corresponding period in 2006.

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