Credit Card Debt Default Rates ‘Up Sharply’ in First Quarter of 2019

April 24, 2019

There was a sharp rise in the number of people defaulting on their credit card debts in the first three months of this year.

That’s according to official figures on the subject published by the Bank of England, with default rates having reportedly increased to levels not seen since the first half of 2017.

Default levels are calculated by the Bank of England based on the balance between the responses it receives from banks in relation to all their credit card deals.

According to the bank, the default rates associated with unsecured lending deals “increased significantly” in the first quarter of this year, with credit card defaults cited as the primary driver of that increase.

The Bank of England measures default rates as an index and looks at whether the relevant rates have increased or decreased since they were last assessed.

So a positive rating means that there has been an increase and the last two quarters both saw rises in the number of credit card defaults being reported nationwide.

Worryingly, the default rate on credit cards increased sharply from a positive 12.7 per cent in the final quarter of 2018 to 22.9 per cent in the first quarter of 2019.

The last time that the bank’s index showed a positive reading of 20 per cent or more was back in the second quarter of 2017, when it was up as high as 25.4 per cent.

There are concerns among some observers that the latest official figures reflect the strain being felt by consumers, many of whom are struggling to cope with pressures on their finances and have clearly become unable to keep pace with their credit card repayment demands.

Peter Briffett, chief executive of Wagestream, a company that allows employees to access their wages earlier than normal, has described the rise in default rates on credit cards as being a “big red flag for household finances”.

“A surge in defaults on credit card borrowing shows that rising wages in the UK mask the financial stress that is still a reality for many,” he said.

“The credit card balance default rate hasn’t been higher since the first half of 2017 and marks a return to rocky ground, far outpacing the deterioration seen with other forms of unsecured lending.”

Joanne Wright

Head Adviser at our Manchester Office

Tel: 0800 001 4247

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