Defaults Accelerate Sharply
The survey, conducted between May 26 and June 12, showed that the net balance of lenders reporting rising default rates on total unsecured loans — encompassing credit cards and personal loans — jumped to around 34 percentage points in the second quarter, up sharply from 18 points in the first quarter. It was the highest reading since the aftermath of the global financial crisis, with lenders expecting a further increase in the months ahead. finance.yahoo.com bankofengland.co.uk business.financialpost.com
Credit card defaults led the deterioration, with a net balance of 37.4 — nearly double the 18.6 recorded in the previous quarter. Default rates on other unsecured loans also rose. Lenders simultaneously tightened credit scoring criteria for credit card applications and reported a decline in the average credit quality of new unsecured borrowers. bankofengland.co.uk
Mortgage Demand Set to Weaken
The same survey signaled a reversal in housing market momentum. Demand for secured lending for house purchases increased during the second quarter, but lenders now expect it to decrease over the three months to end-August. Demand for remortgaging, which surged in Q2, is also expected to decline over the summer. Buy-to-let lending demand is anticipated to fall further still. bankofengland.co.uk
The Bank Rate remains at 3.75% after the Monetary Policy Committee held steady at its June meeting. Average mortgage rates have climbed in recent months, with two-year fixed deals now around 5.73%, up from 4.83% at the start of March, according to broker data from Tembo. bankofengland.co.uk tembomoney.com
Broader Household Strain
The findings arrive alongside a deteriorating economic outlook flagged by lenders themselves. The survey showed that a worsening economic outlook was the primary factor dragging on both secured and unsecured credit availability in the second quarter. Lenders also reported that unsecured credit availability, which had expanded earlier in 2026, is now expected to contract in Q3. bankofengland.co.uk
The data paints a picture of UK households stretched by persistent cost pressures and high borrowing rates — a dynamic the Bank of England will weigh as it considers whether further rate cuts are warranted later this year.
