Rising write-offs seen for credit card debt

LONDON (Reuters) - Holders of Britain's 54 billion pounds of credit card debt face rising write-offs in the coming year as consumers lose their jobs and file for bankruptcy, said ratings agencies Fitch and Moody's.

A Moody's Investors Service index of the annualised write-off or "charge-off" rate for issuers of credit-card backed securities in June exceeded 10 percent for the first time since its inception in 2001, after growing by 46.5 percent over the past year, the agency said in a recent report.

A Fitch Ratings graph showed charge-off rates as of June varying from 6.5 percent for Egg Banking's Pillar Funding to 12.9 percent for MBNA Europe Bank's Chester Asset Receivables Dealings II, with its index at around 10 percent.

"As the economic downturn continues to hit the UK, Fitch expects that further rises in unemployment, together with high levels of borrowing for UK consumers, will continue to exert stress on cardholders, resulting in increasing delinquencies as they struggle to meet their debt obligations," the agency said in a report on Wednesday.

Fitch said the UK unemployment rose to 7.6 percent as of end-April and forecast it would peak at 9.9 percent by the end of 2010. Insolvency filings reached a historical high of 30,253 in the first quarter of this year.

Credit card charge-offs increased more rapidly than unemployment in the first half of the year, Moody's said. It cited other factors including a sharp drop in wealth.

Moody's forecast that UK unemployment would peak at 9.55 percent in the first quarter of 2010 and that charge-offs would peak in the second half of 2010.

If charges-offs increase in line with unemployment, the index will peak at more than 12.5 percent, but other factors could push the rate above 15 percent, Moody's said.

(Editing by Will Waterman)