Big banks warn of rising number of UK customers in default | Cost of living crisis
Britain’s biggest banks say they expect a rise in the number of consumers struggling to repay their credit cards and other loans amid growing concern over the soaring cost of living.
Bank of England figures show high street lenders expect the number of defaults on unsecured loans and business loans to rise in the three months to the end of June.
Details of its quarterly survey of the ‘credit conditions’ of the UK’s biggest banks and credit card providers showed expectations of increased demand for consumer borrowing in the coming months. However, he also suggested that lenders were not worried about losses despite the expected rise in default rates.
Paul Heywood, director of data and analytics at Equifax UK, the consumer credit agency, said the figures reflected a worsening situation that had been developing for several months.
“Significant parts of the UK population are struggling financially, with families at the bottom of the income scale being the hardest hit. The pressures of the cost of living crisis are increasing demand for credit, particularly in areas of unsecured lending and credit cards, while the same inflationary pressures, along with rising interest rates, are suppressing demand for discretionary borrowing,” he said.
Official figures showed UK inflation soared to 7% in March, the highest rate since 1992, while economists said the measure of the annual rise in the cost of living is expected to top 9 % this month, the highest since 1982, during Margaret Thatcher. first government.
The Bank of England is expected to raise interest rates when its monetary policy committee meets early next month, with the inflation rate now more than three times its official target of 2%.
Although growth in average wages has accelerated in recent months, it is failing to keep pace with soaring inflation and is expected to contribute to the biggest squeeze in household disposable income since record highs began in the 1990s. 1950.
Wealthier households have managed to save billions of pounds between themselves during the pandemic as the lockdown kept people away from shops and prevented them from taking holidays abroad. However, poorer families have taken a bigger financial hit and are expected to bear the brunt of the urgent cost of living this year.
Sarah Coles, senior personal finance analyst at financial platform Hargreaves Lansdown, said borrowing is likely to become more difficult in the coming months. “Demand for loans and credit cards skyrocketed earlier this year. With inflation accelerating and skyrocketing prices for many basic necessities, we are increasingly forced to borrow to make ends meet.
Credit card borrowing jumped by £1.5bn in February to £59.5bn, the highest since records began in 1993, fueling concern that low-income households will are turning to expensive forms of loans to meet the rising cost of food, clothing and fuel.
Economists have said squeezing the cost of living will lead to lower consumer spending later this year, weighing on the economic recovery from Covid. However, figures from the Office for National Statistics (ONS) on Thursday indicated little reduction in appetite for spending so far.
The ONS said credit and debit card spending in the UK showed a slight increase of 2 percentage points in the seven days to April 4, including an increase in carryover and social spending.