People who have a mortgage or a credit card have been warned defaults are rising amid the Cost of Living crisis. People with mortgage payments, credit cards to pay off and other household loans have seen defaults recently increased.
Karim Haji, global and UK head of financial services at KPMG, said: “Considering inflation is now falling and is expected to drop to below the Bank of England’s 2% target in the months ahead, rising demand for credit card lending in (the first quarter of 2024) suggests a more positive economic outlook hasn’t fed through to household finances yet.
“Defaults across all unsecured (non-mortgage) lending increasing over the same three-month period indicates many people are still struggling to meet their day-to-day costs. Lenders will need to be vigilant and continue to offer support for borrowers in the interim.”
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The Bank of England’s Credit Conditions Survey found that default rates on mortgages, credit cards and other household loans have recently increased. Lenders reported that default rates on secured loans to households increased and losses given default decreased in Q1. Both were expected to increase in Q2.
Lenders reported that default rates for total unsecured lending increased in Q1 and were expected to increase in Q2. Within this, over the past three months default rates for both credit cards and other loans increased. Default rates for both were expected to increase in Q2.
Lenders reported that default rates on loans to corporates slightly increased for small and medium businesses and were unchanged for large businesses in Q1. These were expected to increase slightly for small businesses, expected to increase for medium-sized businesses, and expected to be unchanged for large businesses in Q2.
Losses given default remained unchanged for businesses of all sizes in Q1, the Bank of England has also found.