12 October 2023 , 12:43
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Lenders are predicting a rise in default rates on mortgages and credit cards, according to a survey by the Bank of England.
The survey suggests that small businesses will see an increase in default rates in the last quarter of 2023, while medium-sized firms may experience a slight increase. However, for large businesses, the rates are expected to remain stable.
In the third quarter of this year, lenders reported an increase in mortgage default rates, with losses also slightly up. These trends are expected to continue in the coming months.
Over the past three months, credit card default rates have slightly decreased, while non-mortgage loan default rates have increased. Both are predicted to rise by the end of November.
The availability of mortgages to households dropped in the three months leading up to the end of August and is forecasted to decrease slightly further by the end of November.
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Demand for mortgages for house purchases and remortgaging fell in the third quarter of this year and is expected to continue to decline in the upcoming months.
Hina Bhudia, a partner at Knight Frank Finance, commented on the report: "Transaction activity in the property market is slowing and many borrowers are still rolling off sub-2% deals and are eager to put off refinancing where they are able to do so."
"Borrowers that do act are generally opting for trackers. For many people, the risk that monthly payments increase in the event of another interest rate hike is worth taking if it gives them the opportunity to see cuts in their monthly outgoings next year."
Lenders also reported that the availability of non-mortgage credit to households fell in the three months to August and is expected to be unchanged in the next few months.
Demand for credit cards and other types of non-mortgage lending is expected to increase in the next few months.
For the latest research, lenders were asked to report changes in the three months to the end of August relative to the three months ending in May.
They were also asked about expectations for the three months to the end of November.
Banks have reported that the overall availability of credit to businesses has remained steady over the past three months and is expected to stay the same in the upcoming months.
It's predicted that demand for loans from small and medium-sized enterprises (SMEs) will slightly drop in the next few months, while demand from larger firms is expected to remain stable.
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