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Bank of England Credit Conditions Survey Q2 2024: "Defaults rising is yet more evidence of the pressure households are under"

ended 11. July 2024

At 09:30 today, the Bank of England published its Q2 Credit Conditions survey, which showed, among other things, that lenders reported that the default rate on secured loans to households increased in Q2, and was expected to increase again in Q3. Losses given default on secured loans increased in Q2, and were expected to be unchanged in Q3 (other findings below). Newspage asked brokers for their views, bottom.

  • Lenders reported that demand for secured lending for house purchase increased in Q2 and was expected to be unchanged in Q3. Demand for secured lending for remortgaging decreased in Q2 and was expected to increase slightly in Q3.
  • Lenders reported that the availability of secured credit to households was unchanged in the three months to end-May 2024 (Q2). It was expected to increase slightly over the next three months to end-August 2024 (Q3).
  • Lenders reported that overall spreads on secured lending to households – relative to Bank Rate or the appropriate swap rate – widened in Q2, and were expected to widen slightly in Q3.

6 responses from the Newspage community

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Michelle Lawson
Director at Lawson Financial
Household finances have been under pressure for a prolonged period of time, as these figures very clearly show. We have a new Government and now we need a new mindset from the Monetary Policy Committee. The Bank of England needs to reduce the base rate on 1st August to support many households that are under phenomenal pressure. All eyes are on Threadneedle Street.
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Ben Perks
Managing Director at Orchard Financial Advisers
Times are hard and this data proves it. Lenders have seen a worrying rise in defaults and unfortunately it looks like there are plenty more to come. People are under immense pressure to keep on top of credit payments and even a base rate cut will do little to ease the strain. The Bank of England base rate cut is so important in August, but we need decisive action from government and a clear plan to help borrowers, an extension to the Mortgage Charter and other innovative additional support would help.
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Andrew Montlake
Managing Director at Coreco
The fact that default rates rose in the second quarter and are expected to rise again in the third quarter shows we are not out of the woods yet. It underlines the importance of a Bank of England rate cut. The second quarter overall was fairly muted after a very strong start to 2024 when lenders came out fighting. The General Election saw a number of people put their plans on hold in June. But that was then and this is now. The third quarter of the year could be transformational as rates are now being reduced across the board, and we're already starting to see some pent-up demand feed through now the General Election is behind us. The rate war that we saw at the start of 2024 is starting to stir once more. The pricing of mortgages is improving with each day that passes but people need to remember that rates are not going back to their previous lows. They'll get better but the good old days are almost certainy over. If the Bank of England cuts rates, demand could increase sharply.
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Emma Jones
Managing Director at Whenthebanksaysno.co.uk
It's worrying to see that default rates rose in the second quarter. As more and more people come off ultra-low rates, many are clearly struggling. That lenders expect defaults to rise again in the third quarter should be noted by the Monetary Policy Committee when it next meets. Demand started to pick up during the latter stages of the second quarter as rates began to improve and may have been even stronger were it not for the General Election. The daily cuts to mortgage rates and criteria improvements we've seen in July so far suggests the third quarter is going to see demand for mortgages really ramp up. Mortgages are getting cheaper and that will stimulate demand by default. But for many people it's still very tough out there.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Defaults rising and more defaults expected by lenders in the next quarter is yet more evidence of the pressure households are under. It's a trend unfolding across the pond, too. Even if we get a reprieve with a base rate cut, that doesn't help people who have had to buy or refinance over the past couple of years. It will be interesting to see what the new government's view is on this, as well as the continuation of the Mortgage Charter that has had a hand in halting repossession proceedings.
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Justin Moy
Managing Director at EHF Mortgages
There was a significant improvement towards the end of the second quarter both in terms of enquiries and applications, as pent up demand eventually pushed buyers and sellers to take action. We are just seeing lenders start to improve their deals, and adjust criteria for the better, so this could be a mortgage version of an Indian Summer very soon. Based on the increased defaults many lenders are seeing and predicting, a rate cut cannot come soon enough.