Banks and building societies told the Bank of England that more customers are falling behind on credit card bills. Using net percentage-point balances, the survey shows a 26-point margin between lenders seeing increases and those seeing decreases in defaults for the three months to September. That pushes the run of rising credit card default rates to 18 months, matching the kind of sustained stress last experienced during the financial crisis period of 2008 to 2009. Lenders anticipate another pickup in the last quarter of the year.
Households are being pinched by higher borrowing costs since the Iran war started at the end of February. This year has seen increases in both mortgage and credit card rates, with UK mortgage rates near 6% per Moneyfacts. Inflation is 3.1% now and is projected to move above 4% early next year. The survey was completed before the recent escalation that pushed oil back above $100 per barrel, so it does not reflect the full impact of that move.
Default rates are the clearest read on household financial stress. Market Briefs covers consumer credit free every morning.
Britons are leaning more on debt to get through the month. A prior Bank of England release showed consumer credit rose by £2.5 billion in August, the biggest monthly increase on record, as households borrowed more on cards and took on additional finance through car dealers and personal loans. By comparison, mortgage defaults dipped in the third quarter, and lenders expected them to hold steady in the final quarter of the year. Homeowners typically treat missing mortgage payments as a last resort.
A six-quarter climb in credit card defaults is a clear sign of stress in household budgets, and the outlook for Q4 points to more of the same. With rates higher, inflation still sticky, and oil rebounding, everyday borrowing is getting pricier. If you rely on credit to bridge expenses or plan big-ticket purchases, this backdrop affects the cost of carrying balances and the risk of tighter lending standards.
Six straight quarters of rising defaults is a trend, not noise. Get the free Market Briefs daily newsletter and follow it.
