Households could find it tougher to get a mortgage or other forms of credit over the summer, amid expectations that default rates on loans are set to increase, a Bank of England survey of lenders suggests.
Banks and building societies expect mortgage availability to decrease slightly over the three months to the end of August, the Credit Conditions Survey found.
The availability of non-mortgage credit to households is also expected to decrease in the third quarter of this year.
Default rates on mortgage and non-mortgage lending to households are expected to increase over the next few months, the report found.
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Demand for mortgages is expected to fall across the three months to the end of August, the Bank found.
Some other recent surveys have pointed to a cooling in the housing market as households grapple with surging living costs.
The Bank also found that demand for borrowing on credit cards increased in the second quarter, and is expected to increase slightly in the three months ahead.
People who are able to meet lenders’ criteria for a credit card may find they can access longer 0% periods, which could help with juggling debts.
Lenders reported that the length of interest-free periods on credit cards for balance transfers and purchases increased in the second quarter, and was expected to increase slightly in the third quarter.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown said: “The banks expect us to keep reaching for our credit cards to plug the growing gaps in our finances during the summer too.
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Some other recent surveys have pointed to a cooling in the housing market as households grapple with surging living costs.
The Bank also found that demand for borrowing on credit cards increased in the second quarter, and is expected to increase slightly in the three months ahead.
People who are able to meet lenders’ criteria for a credit card may find they can access longer 0% periods, which could help with juggling debts.
Lenders reported that the length of interest-free periods on credit cards for balance transfers and purchases increased in the second quarter, and was expected to increase slightly in the third quarter.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown said: “The banks expect us to keep reaching for our credit cards to plug the growing gaps in our finances during the summer too.
“As we’ve gone through the year, rising interest rates have added to the problem.”
The Bank surveys banks and building societies every quarter as part of its role in maintaining financial stability.
The latest survey was carried out between May 30 and June 17.
Lenders were asked to report changes in the three months to the end of May, relative to the period between December and February, and expected changes in the three months to the end of August, relative to the period between March and May.
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The responses reflect lenders’ views and not necessarily those of the Bank.
The survey also found that the overall availability of credit to businesses is expected to remain unchanged in the third quarter.
Demand for loans is expected to decrease for medium-sized businesses in the next few months and fall slightly for both small and large businesses.
Loan default rates for small and medium-sized businesses are expected to increase in the third quarter, while defaults for large businesses are expected to increase slightly by the end of August.
By PA News Agency
Source: The National