Britain’s largest banks say they expect to see 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 high street lenders expect an increase in the number of unsecured loans and business defaults in the three months to the end of June.
The details of the quarterly “Credit Conditions” survey of the UK’s largest banks and credit card issuing companies show that consumer demand is expected to grow in the coming months. However, it also suggests that lenders are not concerned about losses despite the expected growth at the default rate.
Paul Haywood, chief information and analysis officer at consumer credit agency Equifax UK, said the figures reflected a worsening situation that had been developing for several months.
“A significant portion of the UK population is in financial difficulties, with families at the lower end of the income scale being the most affected. The pressure of the life crisis is increasing credit demand, especially in the areas of unsecured debt and credit cards, while the same inflationary pressures, including rising interest rates, are reducing the demand for discretionary loans, ”he said.
Official figures show that UK inflation rose to 7% in March, the highest rate since 1992, when economists said the annual jump in living expenses could exceed 9% this month, the highest since 1982, the first government under Margaret Thatcher.
The Bank of England is expected to raise interest rates sharply when its monetary policy committee meets early next month, with inflation now three times higher than the official target of 2%.
Although average wages have risen in recent months, it is failing to keep pace with rising inflation and is expected to contribute to the biggest pressure on household disposable income since the record began in the 1950s.
Wealthy families were able to save billions of pounds during the epidemic because lockdowns kept people away from shops and stopped them from going on foreign vacations. However, poor families have suffered a major financial blow, and this year is expected to bear the brunt of the cost of emergency living.
Borrowing will be even more difficult in the coming months, says Sarah Coles, a senior personal finance analyst at financial platform Hargreaves Lansdowne. “Demand for this specialty has grown significantly as a result of recent corporate scandals. As inflation accelerates, and the price of tears for many necessities rises, it forces many of us to take out loans to make ends meet. “
Credit card borrowings rose 1.5 billion pounds to 59.5 billion pounds in February, the highest since a record began in 1993, raising concerns that low-income households are turning to expensive debt to cope with rising food, clothing and fuel costs.
Economists say the cost of shrinking lifestyles will drag down consumer spending by the end of this year, relying on economic recovery from Kovid. However, figures from the Office for National Statistics (ONS) on Thursday indicate a slight reduction in spending appetite so far.
ONS said UK credit and debit card spending showed a slight increase of 2 percentage points in the seven days to April 4, including delayed and social spending increases.