Mortgage defaults have seen a significant rise of 30% in the span of three months, according to the Bank of England. Furthermore, lenders anticipate that more borrowers will struggle to make their payments due to the surging rates. In contrast, there has been a notable increase in the demand for credit cards as households grapple with rising costs. Despite market volatility, mortgage demand also saw a rise in the second quarter of the year.
The Bank of England’s Credit Conditions Survey reveals that lenders experienced a 30% increase in mortgage defaults during the second quarter, surpassing the 14% increase seen in the previous quarter. Lenders are projecting that defaults will continue to rise in the third quarter due to the ongoing impact of rising interest rates and inflation on household finances. Stephen Perkins, Managing Director at Yellow Brick Mortgages, stated that lenders are already witnessing a rise in loan defaults and predict further increases in the next quarter. He attributes this trend to the elevated interest rates, which are exacerbating the economic climate and pushing many British families to their financial limits. As a result, lenders anticipate a 19% decrease in the availability of secured credit, including mortgages, in the third quarter.
Despite these circumstances, demand for secured home lending, including both property purchases and remortgages, increased by an impressive 53% from April to June. However, lenders expect this demand to decline sharply as households confront the reality of higher interest rates. In terms of unsecured lending, demand has already increased in the past three months and is expected to rise further as households grapple with inflation.
The Bank of England’s recent decision to raise the base rate for the thirteenth consecutive time was driven by higher-than-expected inflation in May. As a consequence, two-year fixed mortgage rates have climbed to a 15-year high, surpassing the levels experienced during the aftermath of last year’s mini-Budget. The current average two-year fixed rate stands at 6.75%, and market experts predict further rate hikes before the end of the year.
In addition to the surge in mortgage defaults, there has been a 25% increase in demand for credit cards in the second quarter. This highlights the reliance of households on credit to navigate the impact of price inflation on their budgets. Lenders anticipate another 10% rise in credit card demand over the following three months.
The above information underlines the current challenges faced by borrowers and lenders alike in the mortgage and credit markets. As economic conditions continue to fluctuate, it is crucial for borrowers to seek expert advice, such as that offered by David Hollingworth, a mortgage expert and broker at L&C Mortgages. While he aims to provide comprehensive answers to individuals seeking assistance with mortgages, not all queries can be answered due to volume constraints. Additionally, his responses should not be construed as regulated financial advice.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
