The UK’s largest lenders are expecting an additional £788m in credit losses from borrowers this year, according to research from AI-powered transaction analytics firm, Fuse.

Analysis of the most recent financial statements of 20 of the UK’s largest lenders indicate that lenders are expecting losses to exceed £19bn compared to the Expected Credit Loss (ECL) in the previous year when £18.3bn was expected to be lost.

Half of the 20 lenders in the research reported at least a 10% increase in expected losses, with three of these expecting a spike of at least 50% (Atom Bank, Newcastle Building Society and Skipton Building Society).

Fuse explains that a major driver in the rise of expected losses is continued financial pressures on households as well as the erosion of savings cushions and increased reliance on credit. This has led to an increase in expected consumer defaults over the last 12 months.

Reliance on credit is increasing for UK residents

Previous research from Fuse shows that 24% of people are using their savings to pay everyday expenses, but the saving pots of many are either now precariously low or already empty.

As a result, consumer reliance on credit is surging, with 15% of people now wholly reliant on credit to help pay for basic, everyday essentials. 32% of lenders saw an increase in customers defaulting on payments.  

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Sho Sugihara, CEO and Co-Founder of Fuse, commented: “With banks facing a huge number of consumer defaults over the next 12 months, it’s time for more personalised support solutions to help struggling borrowers.

“With savings pots empty and reliance on credit soaring, there is an immediate need for more effective approaches to assess affordability and identify borrowers who may be in need at an earlier stage before it reaches the point of defaulting on loans and likely causing huge long-term financial issues. Unfortunately, a greater proportion of financially vulnerable customers is only likely to drive defaults higher. With many lenders expanding loan books and broadening their customer base, they must scale up their support approaches too.”