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"Lower than expected defaults on credit cards and other borrowing"

By admin | February 22nd, 2010 | Credit Cards

Figures that were recently released have indicated that the level of defaults by consumers on credit cards and other forms of unsecured credit in the last quarter of last year was lower than had been expected.

The figures were released by the Bank of England, and the data showed that in the final three months of last year default levels on credit cards and other unsecured credit actually fell.

Officials from the Bank of England have now said lenders clearly overestimated the rate of defaults on unsecured borrowing in the final quarter of last year.

However, the Trends in Lending report from the Bank of England also showed that whilst the level of defaults for the final three months of last year fell, contrary to expectations, the actual value of defaults increased during the same three months.

There has also been an increase in interest rates on credit cards as a result of this, the Bank of England figures show, with the gap between the average interest rate charged on credit cards and the rock bottom Bank of England base rate, which still stands at just 0.5 percent, being wider now than it was a year ago.

Officials have said that this is the result of heightened risks for lenders amongst other things.

One of the reasons that default rates on credit cards and other unsecured credit was lower than lenders had expected in the final three months of last year was because many had been expecting unemployment levels during that period to be higher than they actually were, and had therefore based estimates and predictions based on a higher unemployment rate.

However, there was actually a surprise drop in the number of people that were out of work in the three months leading up to November 2009.

Tags: Mortgage, Unsecured loan, credit card, interest, debt

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