UK loan defaults continue to rise
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The Bank of England (BoE) has conducted research that shows that the number of people defaulting on personal loans and mortgages is rising and is expected to continue rising for some time.
The research investigated banks and building societies and found that found more people are failing to repay their loans and mortgages and the interest due on them.
Unsurprisingly, the state of the economy, including rising unemployment, is key to understanding the rising figures.
The poll also found that lending to businesses had not risen as fast as had been expected in the past three months. This is a key factor in helping the economy return to growth and has been a central plank of the Government’s anti-recessionary activities.
Analysts and financial institutions have expressed confidence and said that they expect the availability of credit to businesses to rise in the next three months. It will take some time for this to filter through the economy, however.
The BoE research also looked into household credit. It found that householders were likely to be offered, and indeed demand, more credit which was secured on their homes in the next three months. This did not include short term credit like store cards, payday loans and cash advances from credit cards, which were expected to be squeezed slightly over the next quarter.
The BoE research is not overly encouraging about the outlook for bank lending. Overall, the evidence shows that lending will not rise by enough to support a strong and sustained recovery in the wider economy.
The Council of Mortgage Lenders (CML) has said that some government-supported banks have promised to increase lending, but others were in a much tighter position.
A rapid return to pre-credit crunch lending volumes and products remains extremely unlikely.
