Barclays sets aside £1.2bn for loan losses

I mentioned late last year that the number of mortgage defaults would rise this year unless the FCA relaxes its criteria around interest-only mortgages for existing customers to ease the monthly payments, at least until rates come down more. Some customers have seen their payments double in the past couple of months and there will be more. It won’t just be mortgages that are affected but other credit commitments as there is so much less disposable income. It’s not all bad as mortgage rates are reducing for longer term borrowing, so we may not see as many defaults as first predicted.

For Barclays to set aside such a significant sum for loan losses isn’t surprising, as towards the end of 2022 I was seeing a higher number of applicants with defaults, whether they were on energy bills, mortgages or other loans or finance agreements. The immense strain on households is likely to feed through during 2023, especially as people come off ultra-low fixed rates, and the banks are preparing themselves accordingly.