Borrowers turn to credit cards and loans amid squeeze on incomes
Savers are being hit by a drop in demand for mortgages while the squeeze on household incomes is causing more borrowers to turn to credit cards and loans, the latest Bank of England data has shown.
The Bank of England’s credit conditions survey has revealed that demand for mortgages fell in the fourth quarter of last year and is expected to continue to drop in the first three months of this year.
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Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said this is to the detriment of savers, and added that more consumers are being forced to turn to credit cards and loans as a result of a squeeze on their finances.
Banks said the demand for these options rose in the last three months of 2021 and is expected to continue increasing in the first quarter of this year.
Banks are increasingly prepared to lend, and this will continue in the first quarter of 2022 while defaults for both mortgages and unsecured lending are forecasted to rise in the first three months of this year.
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“We could grow old waiting for savings rates to rise, because the big high street banks don’t need our money,” said Coles.
“Demand for mortgages has dropped, and is set to keep falling, so banks don’t need as much cash to fund this lending.
“Meanwhile, the news isn’t any better for borrowers, because the squeeze on household incomes means more people turning to credit cards and loans, and more struggling to make repayments.”