Banks have set aside cash to cover bad debts and prepare for a £7billion hit on unsecured loans

Banks have set aside cash to cover bad debts and brace for a £7billion hit on unsecured loans as the cost of living crisis bites into the finances of everyday Britons

  • UK banks prepare to cover cost of £7bn in unsecured loans
  • Debt expected to be around a third higher than before the pandemic
  • The cost of living crisis has left some borrowers struggling to repay their loans

Banks are preparing to cover the cost of £7billion in unsecured loans over the next two years as the cost of living crisis takes hold.

The amount of debt is expected to be about a third higher than pre-pandemic levels.

But a sudden rise in commodity prices and household energy bills has reduced household purchasing power, leaving some borrowers struggling to repay credit cards and loans.

Banks are preparing to cover the cost of £7billion in unsecured loans over the next two years as the cost of living crisis takes hold. Pictured: Chancellor Rishi Sunak speaking at the annual CBI dinner at the London Brewery on May 18

The news puts pressure on Chancellor Rishi Sunak to do more to help families cope

The news puts pressure on Chancellor Rishi Sunak to do more to help families cope

The news puts pressure on Chancellor Rishi Sunak to do more to help families cope.

Banks are setting aside billions of pounds to cover the sharp rise in bad debts. Analysis by stockbroker AJ Bell for The Mail on Sunday has revealed provisions for bad loans at Lloyds, which make up around a fifth of loans in the country, are set to rise from £820m this year to more than £1.3 billion by 2024.

Anna Anthony, partner at accounting firm EY, said: “Households are already feeling the pressure of the cost of living and unfortunately this is set to get worse in the months ahead.

She also pointed out that the expected peak in default rates on consumer loans is still well below the level reached in the aftermath of the 2008 global financial crisis, when 5% of all unsecured debt was written off.

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