Mortgage defaults hit two-year high as Iran crisis drives borrowing costs sharply higher

"Defaults on secured loans, chiefly residential mortgages, climbed to 6.2 per cent in the first three months of 2026, the highest reading since the final quarter of 2024."

"Unsecured lending told a bleaker story still. Defaults on credit cards, personal loans and overdrafts rose for a fourth consecutive quarter to 18.6 per cent, the highest level since the closing months of 2023."

"Since hostilities escalated in the Middle East, lenders have rapidly repriced risk, pushing the average two-year fixed mortgage rate from around 4.8 per cent to beyond 5.5 per cent in a matter of weeks."

"Raj Abrol, chief executive of the risk platform Galytix, said the pain was radiating well beyond the front doors of British homeowners."

Homeowners and small businesses in Britain are experiencing increased credit strain as mortgage defaults rise to 6.2%. Unsecured lending defaults have also increased to 18.6%. The Bank of England's report indicates that demand for loans was strong before the Iran crisis, but lenders have since raised borrowing costs significantly. The average two-year fixed mortgage rate has jumped from 4.8% to over 5.5%, adding financial pressure on households already struggling with high food and energy bills.

Read at Business Matters