Karim Haji, Head of Financial Services at KPMG UK, comments on today’s Money and Credit Data from The Bank of England:
“Consumer borrowing was down slightly in October, which could be a sign of things to come as we approach the end of the year when loan covenants are reviewed by the banks and fixed rate loans from prior years expire. As a result, customers will find themselves paying significantly more and some may find it increasingly difficult to secure a loan as credit conditions tighten further, as well as defaulting on their loans. While we’re currently seeing the number loan defaults increasing at pace, this is in the context of starting from a very low base and so the absolute level of defaults are not yet a cause of concern. However, with the Autumn Statement offering little hope for borrowers, the combined stress of the cost-of-living crisis and interest rates will really bite and banks will need to continue to step up to provide sound and easily accessible guidance for customers.
“While there has been a marginal rise in mortgage approvals, we don’t expect to see a substantial uptick until later next year. Despite a sharp fall in inflation in October, there are still concerns that interest rates could remain higher for longer, and so lending could remain weak until well into 2024 and possibly beyond. In a bid to perhaps fend off the rising interest rates, homeowners paid off significantly more mortgage debt compared to last month."
