UK’s largest lenders forecast more than £19bn of consumer defaults this year
The UK’s largest lenders are collectively expecting household defaults to rise by almost £800m this year, as borrowers grapple with continued financial pressures in a challenging macro environment.
AI-backed credit analytics firm Fuse assessed the Expected Credit Loss (ECL) for 20 of the UK’s largest lenders, based on their most recent financial statements.
The research found that lenders are expecting losses to exceed £19bn compared to the ECL in the previous year when £18.3bn was expected to be lost.
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10 of the lenders analysed reported at least a 10 per cent increase in expected losses, with three of these forecasting a rise of at least 50 per cent.
Only four of the lenders said they were expecting credit losses to go down this year.
“With banks facing a huge number of consumer defaults over the next 12 months, it’s time for more personalised support solutions to help struggling borrowers,” said Sho Sugihara, chief executive and co-founder of Fuse.
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“With savings pots empty and reliance on credit soaring, there is an immediate need for more effective approaches to assess affordability and identify borrowers who may be in need at an earlier stage before it reaches the point of defaulting on loans and likely causing huge long-term financial issues. Unfortunately, a greater proportion of financially vulnerable customers is only likely to drive defaults higher. With many lenders expanding loan books and broadening their customer base, it’s imperative that they scale up their support approaches too.
“Last year’s Consumer Duty regulations should just be the tip of the iceberg – the financial system is in immediate need of an overhaul to create a fairer, more inclusive model with vulnerable borrowers at its heart. In order for this to happen, lenders need to utilise insights into borrower vulnerability to help them identify points of need before it is too late.”
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Financial results analysed during the research comprise: HSBC, Barclays, Lloyds, NatWest, Standard Chartered, Santander, Nationwide, Virgin Money, Yorkshire Building Society, Co-operative Bank, Coventry Building Society, TSB Bank, Skipton Building Society, Leeds Building Society, OneSavings Bank, Metro Bank, Principality Building Society, Bank of Ireland, Newcastle Building Society and Atom Bank.
