The numbers of people defaulting on loans increased in the run up to Christmas and is expected to rise again, according to a survey of banks and building societies carried out by the Bank of England.

More people were unable to meet mortgage and credit card payments in the final quarter of last year as default rates rose, lenders revealed.

Consequently, banks and building societies were losing more money on mortgages. Both defaults and losses are expected to increase this year, according to the Bank’s credit conditions survey.

At the same time, there was a drop in demand for new mortgages from first-time buyers, while remortgaging levels fell.

The problem was not confined just to mortgages. Defaults for non-mortgage loans, such as car or home loans, rose too and are also expected to rise even further.

The Bank surveys lenders every quarter and the latest survey was carried out between 20 November and 8 December 2023.

Nathan Emerson, CEO at Propertymark, commented: “Although some of the measures reported for 2023 paint a harsh picture of the housing market many of the initial signs we are currently seeing are pointing towards 2024 being a much healthier year.

“As we start to see an uplift on affordability the Bank of England ideally need to start encouraging more confidence in the housing market by paying close attention to interest rates. This will help give banks the confidence to start offering more competitive deals and encourage lending to overall reignite growth in the housing market again.”