21st January 2010
The number of people defaulting on unsecured credit such as
credit cards and loans was overestimated by lenders, a Bank of
England report has said.
Lenders had expected an increase in default rates over the last
three months of 2009, but have instead reported that there was a
decrease.
However, despite fewer people defaulting on credit agreements
the amount of money lost through defaults rose during the same
period - pushing up the cost of interest on credit card
borrowing.
Credit card interest rates have deviated further from the Bank
rate due to the heightened credit risk and lenders have been
stricter in who they lend money to as a result of the economic
downturn.
However, the surprise fall in unemployment means that fewer
people are in default.
Consumers concerned about debt have been keen to pay off their
unsecured credit bills, and lenders told the Bank that they expect
this trend to continue.
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