Concern as bellwether credit card defaults rise
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The Bank of England has identified an increase in the number of consumers defaulting on credit cards, raising alarms in the City of “an early warning indicator” of an economic downturn.
The Bank’s latest credit conditions survey found “a significant increase in default rates on credit card loans” between April and June this year, indicating consumer budgets could be coming under pressure.
The City is nervously watching for signs consumer spending power could be waning, as this would in turn hit the services industry, making up the lion’s share of the UK economy.
Analysts at Keefe, Bruyette & Woods said in a note: “Credit card impairments are often an early warning indicator of a broader downturn.”
They warned the latest Bank survey represented a “hardening” of messaging on credit card defaults since its first quarter survey.
The survey also revealed that that lenders cut back on the amount of unsecured credit they made available to customers for the sixth successive quarter, showing most are pulling back from the market.
Overall demand for unsecured credit was unchanged.
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