UK lenders expect credit card defaults to rise in next months - survey

Credit card defaults in the UK increased in the three months to the end of August, according to a Bank of England survey of lenders.

Defaults on credit cards are also expected by banks and building societies to increase in the three months to the end of November.

Lenders also said default rates on mortgages slightly decreased in the three months to August and are expected to be unchanged in the three months ahead.

Meanwhile, default rates on loans to companies were unchanged in the three months to August and they are predicted by lenders to remain unchanged in the upcoming quarter.

Adam Butler, public policy manager at debt help charity StepChange, said: "Defaults on unsecured credit are rising as people struggle to make their regular repayments alongside essential bills.

"This worrying trend reflects the evidence across our research and client data that households across Britain are feeling the strain of successive waves of inflation.

"With further price shocks to come in the winter with energy price rises, interest rates trending upwards, and wider consumer prices continuing to rise above the Bank (of England)'s target, we expect this to feed through into our advice service with continuing increased demand for support, with the charity already supporting 20% more clients than expected this year."

The Bank of England carries out the Credit Conditions Survey each quarter as part of its role to maintain financial stability.

The latest survey was carried out between August 17 and September 4 and so any impact from more recent developments will not be captured.

Lenders were asked to report changes in the three months to the end of August relative to the previous quarter year between March and May.

They were also asked about their expectations for the three months to the end of November.

Lenders reported mortgage availability decreased in the three months to the end of August and it is expected to increase slightly over the three months to the end of November.

Demand for mortgages for house purchase decreased in the three months to August, and is expected to increase slightly in the three months ahead.

Remortgaging demand fell in the three months to August but it is also expected to increase in the period to the end of November.

Nathan Emerson, chief executive at property professionals' body Propertymark, said: "It is encouraging to see growing confidence around the potential demand for secured lending for house purchases and remortgaging in the months ahead.

"While the year has proved challenging for many consumers from an affordability perspective, improved access to finance could provide an important catalyst for greater confidence across the housing sector as we approach the end of the year and head into 2027.

"Maintaining access to affordable lending will be important in helping the market build momentum and providing greater certainty for consumers."

By Vicky Shaw, Press Association Personal Finance Correspondent

Press Association: Finance

source: PA

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