The number of people defaulting on loans is continuing to rise, a Bank of England report has revealed.

In the survey, UK banks and building societies reported an increase in the number of people who were unable to repay mortgages and other debts. They cited the state of the economy, including rising unemployment, as one of the main contributing factors behind the rising figures.

The poll also found that lending to businesses had not risen by as much as expected in the second quarter of this year. However, financial institutions predicted an increase in the availability of credit during the next three months.

The Bank found that homeowners were likely to demand, and be offered more credit on loans that used their home as security in the third quarter of this year.

However, the number of unsecured loans issued, such as credit cards and personal loans, is likely to fall during this time period.

Paul Samter, an economist at the council of mortgage lenders, said that while some government-supported banks had pledged to increase lending, others were in a much more difficult position.

“A rapid return to pre-credit crunch lending volumes and products remains extremely unlikely,” he said.

Vicky Redwood, of Captial Economics, said that the Bank of England survey was “not overly encouraging about the outlook for bank lending”.

“Overall, we continue to doubt that lending will rise by enough to support a strong and sustained recovery in the wider economy,” she added.

This entry was posted on Thursday, July 2nd, 2009 at 2:39 pm and is filed under Banking, Housing Market, Loans, Mortgages. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.