Mortgage and credit card default rates climbed ahead of Christmas, the Bank of England has reported.
According to the central bank’s survey of lenders, default rates on both secured and unsecured lending rose in the three months to November as household budgets were squeezed after a year of rising interest rates.
Demand for mortgages also subsided in the run up to Christmas, the UK’s central bank said, though this is anticipated to rise again in the new year.
Hargreaves Lansdown analyst Sarah Coles noted the figures reflected a surge in the number of people’s finances being “tipped over” after having “been on a knife edge”.
This follows a rapid increase in costs in recent years, which was met with repeated hikes to UK base interest to 5.25% by the Bank of England in an attempt to cap inflation.
“The proportion of balances behind on payments hasn’t been this bad for unsecured borrowing for at least five years,” she said.
“The only time mortgage lending was worse was in the middle of last year.”
Lenders told the Bank of England that mortgage and credit card defaults were likely to keep rising into this year, as the effects of high interest rates continues to feed through.
The figures also prove “horrible debt costs” being faced by middle income earners, according to Coles.
“The level of mortgage arrears, and the fact that credit cards are more likely to be held by average earners, indicates that lower earners are far from the only ones in trouble,” she warned.