Britain’s largest banks say they expect an increase in the number of consumers struggling to repay credit cards and other loans amid growing concerns about rising living costs.
Figures from the Bank of England show that top-level lenders expect an increase in defaults on unsecured loans and business loans in the three months to the end of June.
Details of a quarterly survey of the UK’s largest banks and credit card providers showed expectations of growing demand for consumer loans in the coming months. However, he also suggests that creditors are not worried about losses despite the expected rise in default rates.
Paul Haywood, chief data and analysis director at Equifax UK, a consumer credit agency, said the figures reflected a deteriorating situation that had been going on for several months.
“Significant parts of the United Kingdom’s population are in financial difficulties, with families at the bottom of the income scale being the hardest hit. “The pressure of the cost of living crisis is pushing for credit, especially on unsecured loans and credit cards, while the same inflationary pressures, along with rising interest rates, are pushing for discretionary loans,” he said.
Official figures show that inflation in the UK rose to 7% in March, the highest since 1992, while economists say the measure of the annual rise in the cost of living is likely to exceed 9% this month, at most high since 1982, during Margaret Thatcher’s first government.
The Bank of England is expected to raise interest rates when its monetary policy committee meets early next month, with inflation now more than three times above the official 2% target.
Although average wage growth has risen in recent months, it has failed to keep pace with rising inflation and is expected to contribute to the biggest contraction in household disposable income since the record began in the 1950s.
Wealthier households managed to save billions of pounds among themselves during the pandemic, as the blockade kept people away from shops and stopped them from taking vacations abroad. However, poorer families have suffered a major financial blow and are expected to bear the brunt of the urgent cost of living this year.
Sarah Coles, a senior personal finance analyst at the Hargreaves Lansdown financial platform, said borrowing is likely to become more difficult in the coming months. “Demand for loans and credit cards has risen earlier this year. With rising inflation and a staggering rise in prices for many of the most important things, this has forced more of us to take out loans to make ends meet. “
Credit card loans jumped £ 1.5 billion in February to £ 59.5 billion, the highest since recordings began in 1993, fueling fears that low-income households are turning to expensive forms of credit for to cope with rising food, clothing and fuel costs.
Economists said the cost of living would cut consumer spending later this year, weighing on Covid’s economic recovery. However, data from the National Statistical Service (ONS) on Thursday showed a slight decrease in the appetite for spending so far.
ONS said the UK’s credit and debit card spending showed a slight increase of 2 percentage points in the seven days to 4 April, including an increase in deferred and social spending.
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