Mortgage bill defaults show rise

The number of borrowers unable to pay mortgage bills showed a surprise increase in the first quarter.

The Bank of England said this was the first rise in default rates reported since the second quarter of 2009, when the country was still in recession.

Lenders warned of more defaults if interest rates rose. The Bank revealed that a balance of 11% of lenders who expected mortgage defaults to stay flat said they rose in the first quarter of this year.

The result comes despite the Bank's base rate being held at a record low of 0.5% and lenders cautioned that a rise in interest rates could see default levels increase further.

The balance of banks that expect an increase in defaults over the next three months increased to the highest level for more than a year - 14.3%. There was also a further sharp drop in demand for mortgages as prime mortgage applications fell and a further decline is expected in the next three months.

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