By Caution is returning to the banking sector with Barclays leading the industry charge downwards in early trading, as worries whip up about loans turning bad and recession fears stalk the global economy.
The UK economy may have escaped recession in 2022 but the Bank of England’s credit conditions survey highlights that a worrying trend of defaults could still be playing out for companies large and small.
Lloyds shares have fallen by around 1% and HSBC down by 1.3% as UK economy shows fragility and worries about global growth rise.
Fresh worries are whipping around the housing sector as the data shows demand for home loans fell back in the last three months of 2022 and is expected to dip further during the first quarter of this year.
It’s clear the disappearance of cheaper mortgage deals has left buyers in limbo, with demand for new properties expected to shrivel.
The warning lights have prompted a fresh slide in housing stocks with Persimmon, Taylor Wimpey and Berkeley Group falling by more than 2%.
Although in the last quarter of the year default rates only increased for small and medium-sized businesses, they are forecast to rise for larger businesses too in the first few months of 2023.
Sharply rising interest rates are clearly taking their toll and its adding to nervousness about taking on too much debt.
Many firms are being much more hesitant about borrowing with demand for corporate lending from small and medium-sized businesses decreasing in last three months of 2022, although it remained, unchanged among larger companies
Defaults on unsecured lending like credit cards and loans were also up at the end of 2022, and are expected to keep climbing in the first three months of this year.
This snapshot paints a picture of increased wariness about the escalating costs of borrowing, and shows increasing vulnerability for companies who took on large loans during the cheap money era and now are facing high costs when renewing terms.
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