LONDON - The Bank of England has released a survey showing a worrying trend in consumer debt, as defaults on unsecured loans, such as credit cards and personal loans, have sharply increased. The report also highlighted a rise in secured loan defaults, albeit at a slower rate than their unsecured counterparts. Additionally, mortgage defaults and arrears have reached a multi-year high, signaling potential stress in the housing market.
The central bank's findings indicate a challenging period ahead for borrowers, with the forecast suggesting a potential increase in default rates in the upcoming quarter. This uptick in defaults comes as the cost of living crisis continues to impact households across the country. Middle-income earners are particularly affected, finding themselves burdened with significant monthly debt payments.
Despite the squeeze on household finances, the demand for unsecured borrowing has seen a decrease. This could reflect a cautious approach by consumers wary of accumulating debt amid economic uncertainty. On the other hand, banks are predicting an increase in credit card borrowing through early 2024, which may suggest that some consumers are relying on credit to manage their expenses during the crisis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.