Default rates on mortgages and credit cards increased in the run-up to Christmas, 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 fourth 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.
Within this, 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 also reported that demand for mortgages from both home buyers and homeowners remortgaging fell in the fourth quarter of 2023. Both were expected to increase in early 2024.
Demand for credit card lending fell in the fourth quarter but was also expected to increase in the early months of this year.
Meanwhile, demand for corporate lending was expected to be unchanged for small and medium-sized businesses early this year, and expected to increase slightly for large businesses.
Riz Malik, founder and director at R3 Mortgages, told website 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.”