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UK credit-card defaults rise as lenders expect further strain

UK lenders reported rising defaults on credit cards and other unsecured borrowing in the three months to August. Their latest survey also points to reduced household credit availability and weaker demand for mortgages. Banks expect credit-card defaults to rise again through November, while defaults on secured household lending have edged down. The findings describe lenders’ responses rather than a measured default rate.

Economics & Markets··Evening
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Credit-card defaults rise while mortgage defaults ease

UK banks and building societies reported an increase in credit-card defaults in the three months to the end of August. The Bank of England, Britain’s central bank, published the findings in its latest Credit Conditions Survey on October 8. Lenders expect another increase in card defaults in the three months to the end of November.[1], [2]

Defaults also increased on other unsecured household loans. For the next period, lenders expect those defaults to fall slightly. Defaults on secured household borrowing decreased slightly, while corporate defaults and losses given default remained unchanged.[1]

Households face reduced credit availability

Availability of both secured and unsecured household credit declined. Lenders anticipate a slight increase in each category in the next period. Demand for home-purchase loans and remortgaging also fell, with increases expected in the coming assessment period. Overall unsecured demand was unchanged, although demand for other unsecured loans edged higher.[1]

The survey covers an August assessment period

The central bank collected responses between August 17 and September 4. Lenders assessed changes relative to the preceding three-month period and supplied their own expectations for November. Responses are weighted by lenders’ market shares. The survey’s net balances describe the direction of reported changes rather than the share of outstanding loans in default.[1]

References

  1. News sourceBank of EnglandUK lenders report rising unsecured-credit defaults↩1↩2↩3↩4
  2. News sourcePA Media / The StandardUK lenders expect credit-card defaults to increase↩
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