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Monday, Aug 11, 2025

Rise in loan defaults but 'no signs' of wider credit crunch

Rise in loan defaults but 'no signs' of wider credit crunch

The survey findings come despite fears that recent turmoil in the global banking sector could lead to a squeeze on credit beyond the housing market, which has been showing signs of a slowdown.
Household loan defaults are on the up and mortgage supply is set to weaken - but there appears to be little sign of a wider tightening in credit, according to a survey of lenders.

Default rates for both secured and unsecured loans saw a rise in the three months to the end of February, the Bank of England's Credit Conditions Survey reported.

Banks and building societies also forecast such defaults would "increase further" in the three months to May.

Meanwhile, the availability of secured credit was unchanged over same period, although lenders cautioned they expect it to become weaker by the time of the next survey.

However supply of consumer credit is expected to increase slightly in the next quarter, while availability of credit to the corporate sector is expected to remain unchanged.

The survey findings come despite fears that recent turmoil in the global banking sector could lead to a squeeze on credit beyond the housing market, which has been showing signs of a slowdown.

Liz Martins, an economist at HSBC, said: "Despite all the monetary tightening and the turmoil of March, there is not too much evidence of banks pulling back."

However she added that the survey ran from the end of February to 17 March, so some responses would have predated Silicon Valley Bank's collapse and the takeover of Credit Suisse.

Groups such as the Financial Conduct Authority have recently expressed concern that thousands of mortgage borrowers could face payment difficulties due to pressures on household finances.

The survey, which is carried out quarterly, does not necessarily reflect the Bank's own views on credit conditions.
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