Credit card defaults rise

Latest Bank of England data (Quarter 3 2026) has shown that credit card defaults increased in the three months to August, with banks and building societies expecting further rises by November, highlighting growing risks in unsecured lending. Within the overall figure, demand for credit card lending was unchanged.

Mortgage defaults fell slightly and are expected to remain stable, while defaults on company loans were unchanged and are forecast to stay level. Mortgage availability declined over the period, as did demand for house purchases and remortgaging, although lenders anticipate a slight recovery in availability and demand over the coming months.

Lenders reported a fall in demand for secured lending for house purchases, but they are predicting this to increase heading into Quarter 4. Likewise, demand for secured lending for remortgaging fell in Q3, and was expected to rise in Q4.

Richard Pinch, Senior Director, Banking & Credit Advisory at Broadstone, said “The latest Credit Conditions Survey suggests the summer months saw a downturn in consumer demand for major borrowing, with demand for secured lending for house purchase falling in the third quarter.

“After a period of improving confidence earlier in the year, renewed uncertainty over the domestic political and economic outlook, alongside the resurgence of tensions in the Middle East, appears to have weighed on household spending and financial decisions over the summer.

“While lenders are expecting demand for mortgage and remortgage lending to pick up in the final quarter, there are reasons to question how quickly that recovery will come through. With the Autumn Budget looming and BOE interest rate hikes potentially on the horizon, households may remain cautious about making major financial commitments.

“The latest RICS survey points to pressure in the housing market already building as we enter the final quarter, with buyer enquiries, agreed sales and house prices all falling in September as higher borrowing costs and economic uncertainty weigh on demand.

“For lenders, understanding individual affordability will remain key in this uncertain environment. A more nuanced assessment of borrowers’ financial circumstances will be essential to ensure consumers can access credit where appropriate, while avoiding commitments that may become difficult to manage if household finances come under further pressure.”

Adam Butler, Public Policy Manager at StepChange, said “Whilst firms are tightening lending, defaults on unsecured credit are rising as people struggle to make their regular repayments alongside essential bills. This worrying trend reflects the evidence across our research and client data that households across Britain are feeling the strain of successive waves of inflation.

“With further price shocks to come in the winter with energy price rises, interest rates trending upwards, and wider consumer prices continuing to rise above the Bank’s target, we expect this to feed through into our advice service with continuing increased demand for support, with the charity already supporting 20% more clients than expected this year.”

Katie Clinton, Head of Financial Services Advisory at KPMG UK said “A further fall in mortgage approvals in August points to affordability pressures continuing to weigh on housing demand, as the shocks from the Iran conflict push up both inflation and mortgage rates. Meanwhile, the drop in remortgaging suggests refinancing demand softened, despite many borrowers reaching the end of existing fixed-term rates.

“The rise in borrowing comes alongside a two-year high in consumer confidence, driven by a better outlook for personal finances and economic conditions. However, with persistently high inflation squeezing disposable incomes, stronger borrowing may also reflect continued affordability challenges pushing people to credit to get by.

“With inflation expected to rise in the coming months and as households head towards the traditionally busy pre-Christmas spending period, pressure on budgets could intensify. It will be particularly important for lenders to engage early in response to signs of financial strain.”