Credit Card and Personal Loan Defaults Up Sharply in Q2

July 14, 2017

The number of British consumers who defaulted on their credit card debts or their personal loans increased sharply in the three months to the end of June.

According to the Bank of England, the number of instances of defaults reported by lenders “increased significantly” during the second quarter of the year.

In fact, the jump was the sharpest from one quarter to another recorded by the Bank since 2009 and a time when the Financial Crisis was causing major problems throughout the British economy.

The proportion of lenders who fear that credit card defaults will increase in the next quarter of the year also reached a level not seen since 2009, according to what the Bank of England calls its credit conditions survey.

Lenders typically indicate that their customers are likely to default on their debts if they are more than 90 days behind on their payments or if they don’t expect that a specific debt will ever be paid in full.

For their part, consumers and borrowers are understood to be feeling added financial pressures as they go through this year thanks in no small part, in many cases, to falls in real wages which mean incomes are growing at a notably slower pace than prices are rising.

A steep decline in the value of the pound since it the 2016 Brexit referendum has helped to push up the costs associated with imported goods to the UK and left households, particularly those with limited financial flexibility, feeling the pinch.

In an increasing number of cases, that financial squeeze has led to credit card users and people with personal loans leaving their debts unpaid and overdue.

According to the Bank of England, lenders are responding to current trends by reducing the availability of credit and particularly forms of lending that are deemed to be relatively risky.

There are concerns that high levels of inflation might soon lead the Bank to introduce a rise in the base rate of interest, which could then lead to a further rise in the number of people defaulting on their debts throughout the country.

If you live anywhere in Scotland and you are struggling to manage your credit card or personal loan debts then Scotland Debt Solutions can help. You can contact us any time to arrange a free and confidential consultation.