Mortgage lenders saw a sharp rise in the number of homeowners defaulting on their loans in the three months to the end of June, and expect significantly more borrowers to miss payments overt he next few months, owed to higher borrowing rates.

The Bank of England’s Credit Conditions Survey, published yesterday, found mortgage defaults in the three months to the end of May leapt to 30.9 on its index, up from 14 in Q1 2023.

The figure is the highest in the survey since mid-2009, when the same indicator topped 60.

The survey, which was carried out between 30 May and 16 June, asked lenders to report changes in Q2 2023, compared to the previous three months, with a score then assigned based on their response and market share.

The study also revealed that companies expect demand for mortgages to drop sharply in Q3 2023, while the availability of mortgages and non-mortgage credit to households is also expected to fall.

But most lenders think that the availability of credit to businesses will be unchanged over the corresponding period.

“Lenders reported that losses and default rates on secured loans to households increased in Q2, and were expected to increase in Q3,” the Bank said.

Stephen Perkins, managing director at broker, Yellow Brick Mortgages, said: “They’re already rising, but lenders are expecting losses and default rates on secured loans to increase even further in the next quarter, which is unsurprising given the heights interest rates are now reaching.

“Demand [for credit] is also expected to fall in the third quarter, which again is what you would expect in such a brutal economic climate.

“Repeated increases to the Bank of England base rate have done nothing to curb inflation and are massively impacting the economy and pushing millions of British families’ finances beyond the brink.”

Riz Malik, director of R3 Mortgages, added: “It is highly troubling to see that the rates of default on secured loans are escalating and are anticipated to rise further.”