Bank of England Predicts Rise in Bad Debts

In a statement yesterday, the Bank of England issued a stark warning that the number of of households in the UK unable to keep up with their debts is likely to rise – so make sure you stay on top of yours.

If you’re worried about your ability to repay your credit cards, loans and mortgages, you’re not alone.

The Bank of England issued a warning yesterday that it expects the number of households defaulting on their debt to rise over the next few months.

The Bank’s Credit Conditions survey found that while the number of people getting into financial trouble has been stable recently, it is widely expected to rise in the near future.

Default rates on mortgages and secured loans in the second quarter of 2011 were similar to those in the first, but are expected to increase in the third quarter. Losses from customers defaulting on secured loans increased for the third consecutive quarter, said the Bank.

Unsecured loan losses fall

In a small ray of good news, losses from unsecured loans turning bad have continued to fall for seven successive quarters. This news is largely eclipsed, however, by figures showing that defaults on credit card debt increased between April and June, and are expected to continue going up until September.

With the squeeze in the real value of wages and high inflation pushing up prices of consumer goods, keeping up with loan repayments is becoming harder for many families.

And with mortgages being the biggest single debt for most households, the Council of Mortgage lenders has also raised its forecast for home repossessions. It predicts a rise from 36,000 last year to 40,000 this year and 45,000 in 2012.

Moneyhighstreet comments: “Debt is becoming more of a problem for UK consumers as many people borrow more to pay off existing loans and credit cards.

“If you think you are likely to struggle with repayments, don’t wait until you default. Seek debt help now to plan ahead and manage your debts. Debt advisors are there to help you.

“As always, before you take on new debt, be sure that you’re getting the best deal. Whether you’re looking for a credit card or a mortgage, compare prices online before you buy – lower rates can save you hundreds or even thousands of pounds over the long term.”