Bank of England Credit Conditions Survey shows rising defaults on unsecured lending

The Bank of England's Credit Conditions Survey for the third quarter of 2026, published on 8 October, showed credit card defaults increased in the three months to August, with banks and building societies expecting further rises by November¹. Debt charity StepChange said the figures suggested households were struggling to keep up with regular credit commitments².

The survey also reported that mortgage defaults fell slightly and are expected to remain stable, while defaults on company loans were unchanged and are forecast to stay level¹. Mortgage availability declined over the period, as did demand for house purchases and remortgaging, although lenders anticipate a slight recovery in availability and demand over the coming months¹. Demand for credit card lending was unchanged within the overall figure¹. The survey was conducted between 17 August and 4 September, with lenders asked about changes during the three months to August and their expectations for the three months to November; the Bank said the findings would not capture developments occurring after the survey period³.

StepChange published polling conducted by YouGov, which found that two in five (38%) people found it difficult to keep up with household bills and credit commitments in the last few months². Among StepChange clients, the proportion with credit card debt has risen to three in four (75%), up from two in three (69%) in August 2025². The polling sample was 2,142 adults, with fieldwork undertaken between 9 and 10 July 2026².

Adam Butler, Public Policy Manager at StepChange, said:

The charity said it is already supporting 20% more clients than expected this year². Richard Pinch, Senior Director, Banking & Credit Advisory at Broadstone, said the summer months saw a downturn in consumer demand for major borrowing, and that renewed uncertainty over the domestic political and economic outlook, alongside the resurgence of tensions in the Middle East, appeared to have weighed on household spending and financial decisions over the summer¹. Katie Clinton, Head of Financial Services Advisory at KPMG UK, said a further fall in mortgage approvals in August points to affordability pressures continuing to weigh on housing demand, and that stronger borrowing may also reflect continued affordability challenges pushing people to credit to get by¹.

Why it matters for households

The survey covers lending by banks and building societies, so the rise in credit card defaults describes what lenders are recording on existing card balances rather than a change in the cost of borrowing. Lenders told the Bank they expect defaults to rise further during the three months to the end of November³, which takes the picture into the winter period.

For mortgage borrowers the position reported is different: default rates decreased slightly in the three months to August and lenders expect them to remain unchanged through to the end of November³. Business loan defaults were unchanged and are expected to remain stable³.

StepChange's own client data shows a higher share of its clients holding credit card debt than in August 2025, at 75% against 69%². Its YouGov polling, carried out in July 2026, found 38% of adults had found it difficult to keep up with household bills and credit commitments in recent months². The charity says it is supporting 20% more clients than expected this year².

What happens next

Lenders expect credit card defaults to rise further in the three months to the end of November³. They expect a slight improvement in mortgage availability over the same period, a small increase in demand for mortgages to buy a home, and an increase in remortgaging demand³. The Bank of England carries out its Credit Conditions Survey every quarter as part of its work to monitor financial stability³.

Households dealing with problem debt can read our guides to loans and high-cost short-term credit, and to how the Financial Lives Survey tracks consumer circumstances.