The Bank of England said its latest industry survey found that banks raised the cost of credit cards in the third quarter and planned to continue increasing average interest rates in the fourth. A majority of lenders are also expected to restrict loan products in the fourth quarter, though not by as much as in the third, further limiting access to loans as the second wave of the coronavirus spreads across the UK.
The worsening outlook for many consumers was emphasised by industry forecasts predicting a rise in defaults on unsecured loans and mortgages over the next three months, according to The Guardian. The Bank of England said lenders reported that overall unsecured lending spreads widened slightly in the third quarter and were expected to widen further in the fourth quarter. Lenders widen the spread between the cost of access to credit and the price at which they sell it to increase profit margins, although in an economic downturn this move can be used to protect margins against a rise in defaults by borrowers.
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