UK Lenders Brace for Fresh Increase in Mortgage Defaults.

UK banks are preparing for a potential increase in mortgage defaults as homeowners are forced to refinance at high borrowing costs. Default rates rose in the second quarter and could see the largest increase in a year, according to the Bank of England's credit conditions survey. While the survey suggests that demand for mortgages is recovering, it also highlights the strain caused by 14 consecutive interest rate hikes. Lenders anticipate a slight increase in mortgage supply in the third quarter and have observed rising demand for home loans despite high mortgage rates. The Bank of England may begin cutting rates in August or September, but a cautious approach is expected due to ongoing price and wage pressures. Mortgage rates have risen since the beginning of the year, with the average 2-year fixed mortgage rate currently at 5.92%. The survey also revealed a slight increase in defaults on credit cards in the second quarter, with no change expected in the third quarter. Demand for credit card borrowing has risen recently but is predicted to decline as household finances improve. [Extracted from the article]