Borrowers Turn to Credit Cards and Loans Amid Squeezing Income
Savers hit by waning demand for mortgages as squeezing household income pushes more borrowers to turn to credit cards and loans, according to the latest data from the Bank of England.
The Bank of England’s credit survey found demand for mortgages fell in the fourth quarter of last year and is expected to continue to decline in the first three months of this year.
Read more: P2P platforms say small BoE rate hike won’t affect them
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said this comes at the expense of savers, and added that more and more consumers are being forced to turn to credit cards and loans due to the squeezing their finances.
Banks said demand for these options has increased in the last three months of 2021 and is expected to continue to rise in the first quarter of this year.
Banks are increasingly ready to lend, and this will continue in the first quarter of 2022, while mortgage and unsecured loan defaults are expected to increase in the first three months of this year.
Read more: Base rate hike will see banks ‘crush’ borrowers
Read more: Sunak urged to provide more support to SMEs as Omicron spreads
“We could get old while waiting for savings rates to rise because the big banks don’t need our money,” Coles said.
“The demand for mortgages has fallen and is expected to continue to decline, so banks don’t need as much cash to fund these loans.
“Until then, the news is no better for borrowers, as squeezing household income means more people turn to credit cards and loans, and more difficulty in repaying.”