News

Lenders report mortgage defaults rise in Q1 of 2024

The Bank of England credit condition survey for the first quarter of 2024 has revealed mortgage default rates are on the rise at the start of 2024. The figures shown from BoE revealed that both secured and unsecured lending have had an increase in default rates, this includes credit cards and other types of loans. However, the BoE reported the ‘net balance’ figure remained below what was recorded in the second and third quarter of 2024.

The data revealed also highlighted that lender losses from these defaults decreased over this period but was expected to rise in the second quarter of 2024. It is however important to remember this data set does not record the actual number of defaults but is simply a survey among lenders designed to give early insights on credit markets.

Richard Lane, the Chief Client Officer at StepChange a leading UK debt charity responded to the survey stating “It is always a concern that the worst impact of high inflation could take a while to filter through to household finances, and worryingly that may now be the case” he also added “last year we saw debt across household bills increase by 10% among StepChange clients. With the price of most essentials continuing to rise, many will resort to borrowing to afford them.”

The FCA also reminded lenders of their duty to help borrowers and as part of Consumer Duty lenders and brokers should have mechanisms in place to identify financial difficulty early and offer tangible support and referrals to free debt advice for those who are.

Overall, it seems the next quarter of 2024 will bring in a higher demand for lending. With the cost of living not budging you can assume a lot of applicants will be looking at consolidating multiple debts they may have acquired previously to lower their monthly outgoings. However, as mortgage brokers you should stay vigilant and always try to identify and remind customers of potential risks that borrowing further may bring.