Mortgage defaults up 30% in three months as lenders expect more missed payments
Mortgage defaults rise 30% in three months… and lenders say they expect more missed payments thanks to rising interest rates
- Demand for credit cards increased as households struggle with rising costs
- Despite the market volatility, demand for mortgages increased in the second quarter
Mortgage lenders saw an increase in the number of customers defaulting on their loans in the three months to the end of June, and expect more borrowers to default in the coming months.
Lenders’ responses to the Bank of England’s Credit Conditions Survey showed that mortgage defaults rose by 30 percent in the second quarter of the year.
This was an increase from the three months through March, when the share of missed payments increased by 14 percent.
Lenders expect defaults to pick up again in the third quarter as rising interest rates and inflation continue to wreak havoc on household finances.
Turbulent times: Rising mortgage rates and higher household costs have led to a spike in missed payments
Stephen Perkins, managing director at broker Yellow Brick Mortgages, said: “They’re already rising, but lenders expect losses and defaults on secured loans to rise even further in the next quarter, which isn’t surprising given the high interest rates. reach now.
‘Ask [for credit] is also expected to decline in the third quarter, which is again what you would expect in such an unforgiving economic climate.
“Repeated increases in the Bank of England’s key interest rates have done nothing to curb inflation and are having a huge impact on the economy, pushing the finances of millions of British households over the brink.”
In general, lenders expect the availability of secured credit, such as mortgages, to decline by 19 percent in the third quarter of the year.
However, despite the volatility in the mortgage market, demand for secured home loans increased from April to June this year. Demand for both home loans to buy a home and to re-mortgage increased by 53 percent during that period.
Lenders expect this to fall sharply now that households are confronted with significantly higher interest rates.
Demand for unsecured loans has increased over the past three months and is expected to rise further as households manage inflation
The Bank of England made its thirteenth consecutive key rate hike last month after disappointingly high inflation in May prompted the Monetary Policy Committee to continue its efforts to bring the rate down.
Two-year fixed mortgage rates have reached a 15-year high, surpassing the level reached at the height of the mini-budget fallout last October.
The current two-year average fixed interest rate is now 6.75 percent, according to Moneyfacts, and the market expects interest rates to rise further before the end of the year.
Demand for credit cards also increased 25 percent in the second quarter of the year, highlighting the extent to which households rely on credit to manage the impact of price inflation on budgets.
Lenders expect this to rise again by 10 percent in the three months from June.