A net percentage balance of 12.5 lenders said home loan defaults increased in the third quarter, compared to a balance of 24 over the previous three months, says the central bank’s Credit Conditions Survey Q3.

But it adds that a balance of 31.1 lenders estimate this will increase in the run-up to Christmas.

This is the seventh quarter in a row in which lenders have reported a rise in default rates on secured loans.

This data comes despite the Bank’s Monetary Policy Committee voting to hold the base rate at 5%, following a 0.25% cut in August. Its first reduction in four years.

While inflation came in at 2.2% in August, unchanged from July, just above the BoE’s 2% target.

KPMG global and UK head of financial services Karim Haji says: “These latest figures suggest that many households are still struggling in the current environment.”

In the second quarter of the year, there were 96,070 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2024, broadly unchanged from in the previous quarter, according to UK Finance figures.

The Bank of England data, however, reports that lenders say the availability of mortgage loans lifted to a net balance of 10 in the third quarter from a balance of 2 in the previous quarter, and is expected to remain unchanged in the final quarter of the year.

The survey adds that demand for secured lending for house purchases was unchanged in the third quarter and was expected to increase in the final three months.

Hargreaves Lansdown head of personal finance Sarah Coles says: “Mortgage default rates are mounting, and we’ve not yet reached the peak. Banks expect them to be up again by the end of the year.

“Given that those on lower incomes don’t tend to have mortgages, it demonstrates that higher mortgage rates are hitting middle-earners hard.

“Anyone who has overstretched themselves in the property market, or took on too many fixed costs while mortgage rates were lower, has faced a Herculean task when they remortgaged.

Coles adds: “The HL Savings & Resilience Barometer showed that 13% of households who have had to remortgage onto higher rates have poor financial resilience, and on average they have just £315 left at the end of the month — £95 less than those who have yet to remortgage.

“The positive news is that mortgage rates are falling, so there’s a smaller step-up in monthly payments when people remortgage. However, these figures clearly show that for an awful lot of people, this is too little, too late.”