Bank of England warns of mortgage and credit card debt crisis as defaults rise
The Bank of England has warned that default rates on mortgages and credit cards are rising – and are expected to increase further in the coming months
In the run-up to Christmas, mortgage and credit card default rates saw a rise, according to a Bank of England survey of lenders.
Banks and building societies reported that both defaults and losses given default increased on mortgages in the last quarter of 2023 – and both were expected to increase further in early 2024. Lenders also reported that default rates on non-mortgage lending to households increased in the fourth quarter and were also expected to increase in the first quarter of this year, the credit conditions survey found.
Over the previous three months, default rates for credit cards increased and defaults for other loans slightly increased. Defaults for credit cards and for other loans were expected to increase in early 2024. Lenders reported that default rates on lending to businesses were unchanged for firms of all sizes in the fourth quarter of 2023.
Default rates were expected to increase slightly for small and medium-sized businesses, and to be unchanged for large businesses in the first quarter of this year. The Bank surveys lenders every quarter and the latest survey was carried out between November 20 and December 8 2023.
Lenders are asked in the survey about credit conditions over the previous three months and their expectations for the three months ahead. The results do not necessarily reflect the views of the Bank of England. Lenders said that fewer people wanted mortgages from both home buyers and those switching their mortgage in the last part of 2023.
They think more people will want them in early 2024. Fewer people also wanted to borrow on credit cards at the end of 2023, but this is expected to go up in the new year. For businesses, the number of small and medium-sized ones wanting loans is likely to stay the same early this year, but more big businesses might want loans.
Riz Malik, who started R3 Mortgages, told Newspage: “The increase in default rates is concerning and highlights that we are certainly not out of the woods yet. Those who are struggling should speak to their lender or seek advice to see if there are any other options to restructure their debt as early as possible.”
* An AI tool was used to add an extra layer to the editing process for this story. You can report any errors to webhomepage@mirror.co.uk
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