Household and business loan defaults predicted to increase

Latest research by The Bank of England’s Credit Conditions Survey suggests more households and businesses will default on loans in the coming months, with lenders expecting the availability of mortgages and consumer and corporate credit to decline.

The Bank of England says that this is likely to see default rates on mortgages, credit cards and other household loans and business loans increase.

The poll asked banks and building societies to forecast changes they expect to see between September and November, compared with the three months between June and August. Lenders said mortgage availability had already decreased and is expected to fall further, with the availability of non-mortgage credit to households down slightly and set to continue to fall.

While the overall availability of credit to businesses has remained unchanged, it is predicted to decrease slightly in the months ahead. Lenders expect demand for mortgages from home-buyers to fall in the next few months, while demand for re-mortgaging is predicted to increase.

The Bank survey also showed that default rates on mortgages slightly increased between July and September and were expected to go up further between October and December, while defaults on credit cards and other unsecured loans are also set to rise as the squeeze on household finances from the cost of living intensifies.

Samuel Tombs, Chief UK economist at Pantheon Macroeconomics, said in a tweet “The Bank of England’s credit conditions survey shows that lenders were preparing to tighten access to mortgages even before the mini-budget. But the mini-budget has greatly hastened the rate of deterioration. Good luck to anyone refinancing right now.”