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Default levels on credit rise 22 January 2010
Steven Jackson (about the author)

The total amount lost through defaults rose in the last three months of 2009 the Bank's Trends in Lending report said.

One of the consequenses of this increase has been a rise in the cost of interest on credit card borrowing.

However, the Bank of England also said that the number of people who defaulted on unsecured credit such as credit cards and loans, was lower than estimated. Lenders reported that default rates on unsecured credit fell in the last three months of 2009, contrary to their expectations of an increase.

Steve Jackson of BeatMyDebt.com said that it was welcome news that the number of people in default was fewer than expected. "However the fact that the money not being paid back continues to rise shows those already in trouble are finding it increasingly difficult to make ends meet" he added. 

Lenders stricter over lending

The margin between the Bank rate and the interest rate on credit cards is much wider than a year ago owing to the heightened credit risk, but the difference remained relatively static on personal loans, the report said.

Lenders have been stricter in who they lend money to as a result of the economic downturn.

However, default numbers were lower than expected because they thought unemployment would be worse than it has proved to be. The number of people out of work in the UK saw a surprise fall in the three months to November.

Consumers have been keen to pay off their unsecured credit bills, and lenders told the Bank that they expected this trend to continue.

Source: BBC News