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BoE Credit Conditions: Losses on secured loans up in Q2 as experts warn "borrowers are finding it harder to repay"

ended 03. July 2025

LOSSES on secured loans are up in Q2 and expected to rise further in Q3 with experts warning new figures show "borrowers are finding it harder to repay".

Lenders reported that the availability of secured credit to households increased in the three months to the end of May 2025 and was expected to increase over the next three months to end of August 2025, according to Bank of England data published today. 

Meanwhile, lenders reported that demand for secured lending for house purchase increased in Q2, and was expected to decrease in Q3. 

Demand for secured lending for remortgaging increased in Q2, and was expected to increase in Q3. 

Additionally, lenders reported that overall spreads on secured lending to households – relative to Bank Rate or the appropriate swap rate – slightly widened in Q2, and were expected to be unchanged in Q3. 

Lastly, lenders reported that default rates on secured loans to households were unchanged in Q2, and were expected to be unchanged in Q3. 

Losses given default on secured loans slightly increased in Q2, and were expected to increase slightly in Q3.

Newspage spoke to experts who reacted to the figures.

Ken James, Director at Contractor Mortgage Services, commented: “The figures are a sign that some borrowers are finding it harder to repay, even though we have seen a strong appetite to lend and credit becomes more available. While default rates remained stable, the share of money lenders fail to recover when a borrower default saw a slight increase.

"Lenders anticipate this will continue rising in the coming months, reflecting ongoing financial pressure on households. The fact that losses are expected to increase shows the pressure many households are under.

"The cost-of-living crisis is always simmering in the back of everyone’s mind and bank balances. With the economy under all kinds of pressure and the jobs market also unravelling, it's hard to know whether the demand will be there to meet lenders' growing appetite to lend.”

Michelle Lawson, Director at Lawson Financial, commented: “Lenders make money when they are lending so they aren't habitually intentional business blockers.

"We are quite busy at the moment but the market does need an injection of excitement to get properties moving. The cost of living is still biting so with Bank of England policymaker Alan Taylor urging more aggressive base rate cuts to deliver a softer landing for the economy, this may be the tonic the market so desperately needs.”

Katy Eatenton, Mortgage & Protection Specialist at Lifetime Wealth Management, commented: “It's interesting that lenders expect demand for mortgages to decrease in the third quarter, all the more so given that many have been really innovating in a mission to get the market moving.

"We're not expecting fireworks over the summer due to the sheer level of economic uncertainty and ongoing pressure on households, but demand is fairly steady based on our experience. The fact that losses are expected to increase by lenders shows the pressure many households are under. The cost of living crisis rolls on, albeit not as pronounced as it once was.”

Daniel Hobbs, CEO at New Leaf Distribution, commented: “It's hard to predict with any certainty how demand will fare in the months ahead as one single event, as we have seen so many times, can turn the market and sentiment on a dime — for the better or for the worse.

"Lenders do seem to have more appetite to get money out into the market at present, as the survey reveals, but with the economy under all kinds of pressure, and the jobs market also having the jitters, it's hard to know whether the demand will be there to meet it.”

Ranald Mitchell, Director at Charwin Mortgages, commented: “Lenders are clearly opening the taps, but consumers are approaching with caution. The rise in mortgage availability signals renewed lender confidence, yet the anticipated dip in purchase demand for Q3 suggests households are still wary, likely due to cost-of-living pressures, stubborn inflation, and affordability constraints.

"Interestingly, remortgage demand continues to grow, showing that many borrowers are focused on securing better deals or restructuring debt rather than making new moves.

"That’s not a housing market in full recovery, it’s a consumer base in defensive mode. The fact that default rates remain steady, but losses given default are edging up, tells us that while people are hanging on, the margin for error is tightening. This is a market fuelled by necessity, not exuberance.”

Kundan Bhaduri, Entrepreneur at The Kushman Group, commented: "So this report should be seen as a polite nod from lenders that they’re open for business again, just don’t expect a group hug or a competitive fixed rate.

"Yes, credit availability rose in Q2 and is set to rise again, but spreads are still widening, meaning mortgages aren’t getting cheaper, just marginally easier to obtain, provided you can tick every box short of providing a DNA sample. Demand for house purchases rose last quarter but is now expected to fall.

"Because between stamp duty burdens, affordability ceilings, and regulatory fog, buyers are losing the will to transact. Remortgaging, however is on the up, unsurprising with households desperate to escape the tail-end of Truss-era tracker deals. Overvalued assets and sluggish sales are starting to bite.

“We’re not in a crash, but we’re definitely out of the Goldilocks zone. Credit is flowing, but confidence is not, and that says more than anything about our confidence in the weeping chancellor and her lot of motley fools.”

7 responses from the Newspage community

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Editor
Ken James
Director at Contractor Mortgage Services
The figures are a sign that some borrowers are finding it harder to repay, even though we have seen a strong appetite to lend and credit becomes more available. While default rates remained stable, the share of money lenders fail to recover when a borrower default saw a slight increase.

Lenders anticipate this will continue rising in the coming months, reflecting ongoing financial pressure on households. The fact that losses are expected to increase shows the pressure many households are under.

The cost-of-living crisis is always simmering in the back of everyone’s mind and bank balances. With the economy under all kinds of pressure and the jobs market also unravelling, it's hard to know whether the demand will be there to meet lenders' growing appetite to lend.
Star Quote
Copy

Editor
Michelle Lawson
Director at Lawson Financial
Lenders make money when they are lending so they aren't habitually intentional business blockers. We are quite busy at the moment but the market does need an injection of excitement to get properties moving. The cost of living is still biting so with Bank of England policymaker Alan Taylor urging more aggressive base rate cuts to deliver a softer landing for the economy, this may be the tonic the market so desperately needs.
Copy

Editor
Katy Eatenton
Mortgage & Protection Specialist at Eatenton Finance
It's interesting that lenders expect demand for mortgages to decrease in the third quarter, all the more so given that many have been really innovating in a mission to get the market moving. We're not expecting fireworks over the summer due to the sheer level of economic uncertainty and ongoing pressure on households, but demand is fairly steady based on our experience. The fact that losses are expected to increase by lenders shows the struggles many households are facing. The cost of living crisis rolls on, albeit not as pronounced as it once was.
Copy

Editor
Daniel Hobbs
CEO at New Leaf Distribution
It's hard to predict with any certainty how demand will fare in the months ahead as one single event, as we have seen so many times, can turn the market and sentiment on a dime — for the better or for the worse. Lenders do seem to have more appetite to get money out into the market at present, as the survey reveals, but with the economy under all kinds of pressure, and the jobs market also having the jitters, it's hard to know whether the demand will be there to meet it.
Copy

Editor
Tony Redondo
Founder at Cosmos Currency Exchange
The survey’s reliance on lender responses may obscure underlying issues, including regional disparities in housing affordability or the impact of high loan-to-value lending. The BoE should dig deeper into these dynamics to avoid underestimating risks. Default rates held steady, but losses given default slightly increased and are expected to rise further, especially in light of recent events and deteriorating economic conditions, with further tax increases now expected to be announced in the autumn.
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Editor
Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
Lenders are clearly opening the taps, but consumers are approaching with caution. The rise in mortgage availability signals renewed lender confidence, yet the anticipated dip in purchase demand for Q3 suggests households are still wary, likely due to cost-of-living pressures, stubborn inflation, and affordability constraints. Interestingly, remortgage demand continues to grow, showing that many borrowers are focused on securing better deals or restructuring debt rather than making new moves. That’s not a housing market in full recovery, it’s a consumer base in defensive mode. The fact that default rates remain steady, but losses given default are edging up, tells us that while people are hanging on, the margin for error is tightening. This is a market fuelled by necessity, not exuberance.
Copy

Kundan Bhaduri
Entrepreneur, Investor and Landlord at The Kushman Group
So this report should be seen as a polite nod from lenders that they are open for business again, just don’t expect a group hug or a competitive fixed rate. Yes, credit availability rose in Q2 and is set to rise again, but spreads are still widening, meaning mortgages aren’t getting cheaper, just marginally easier to obtain, provided you can tick every box short of providing a DNA sample.

Demand for house purchases rose last quarter but is now expected to fall. Because between stamp duty burdens, affordability ceilings, and regulatory fog, buyers are losing the will to transact. Remortgaging, however is on the up, unsurprising with households desperate to escape the tail-end of Truss-era mortgage deals.

Overvalued assets and sluggish sales are starting to bite. We’re not in a crash, but we’re definitely out of the Goldilocks zone. Credit is flowing, but confidence is not, and that says more than anything about our confidence in the weeping chancellor and her lot of motley fools.