THE CREDIT CONDITIONS SURVEY for the first quarter of 2024, published by the Bank of England on 11 April, has revealed a rise in default rates on credit cards and other loans, while overall demand for unsecured lending has increased.
Lenders expect this trend to continue into the second quarter of this year. StepChange says this may indicate that households are increasingly turning to credit to make ends meet, and struggling with repayments, making them vulnerable to financial harm.
Richard Lane, Chief Client Officer at StepChange, said: “It was 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. Some people’s finances may have bounced back from this crisis but for others, cost of living pressures are still persisting. Last year we saw debt across household bills increase by 10 per cent among StepChange clients, while total unsecured debt reached its highest level for a decade. With the price of most essentials continuing to rise, many will resort to borrowing to afford them.
“We would urge lenders to be aware of how many of their customers may just be facing the ramifications of two years of high inflation now. The FCA yesterday reminded lenders of their duty to help borrowers in financial difficulty. As part of the Consumer Duty, it’s important that lenders have the mechanisms in place to identify that financial difficulty early, and offer tangible support and referrals to free debt advice for those who are struggling.”
* Read the Bank of England’s Credit Conditions Survey for Q1 of 2024 here.
Source: StepChange