Banks expect more defaults on mortgages

Julian Harris
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DOWNBEAT mortgage lenders fear that defaults on payments could rise again in the coming months, a Bank of England survey revealed yesterday.

Despite a “broadly unchanged” number of defaults in the second quarter of this year, losses made on defaults rose for the third quarter in a row – and “lenders expected the default rate to rise in the coming quarter.”

“The balance of lenders expecting a rise in the default rate of secured loans rose to its highest level since the end of 2009,” noted Vicky Redwood of Capital Economics.

“The flat housing market probably is not helping either. One factor preventing banks from wanting to lend could be the outlook for bad debts,” she added.

Lenders have not increased the availability of secured credit to households in the last three months, the Bank’s credit conditions survey revealed – and availability is likely “to remain flat in the next three months.”

Mortgage providers reported that demand had increased “a little” in the last three months, yet was also expected to decline again in the third quarter of the year.

However, the grip on unsecured credit could be relaxed in the coming three months, the survey showed.

Demand for borrowing on credit cards is expected to see a “slight increase” in the coming months.

Borrowing on plastic has been sluggish this year, according to separate studies, yet many credit cards are extending interest-free periods to tempt customers into spending, the website Moneyfacts revealed this week.

Clashes between companies and bank could emerge later this year, with the survey unveiling rising demand for credit at both small and large firms, yet a reluctance from lenders to loosen the supply.

The availability of credit to corporates of all sizes is “expected to remain broadly unchanged in quarter three”, the report said.