Santander UK has warned that borrowers may struggle to repay their debts this year due to an impending recession predicted by the IMF and Bank of England.
The bank has set aside £321 million to cover potential defaults, citing rising prices and a deterioration in the economic environment as reasons for the increased provision.
The bank predicts that house prices will fall by about 10 per cent, which could further impact borrowers’ ability to repay loans and mortgages.
The warning highlights the importance of lenders being prepared to deal with potential defaults and losses.
Setting aside funds to cover potential losses is a prudent approach that can help banks weather the storm of a recession and emerge stronger on the other side.
Santander UK’s chief executive, Mike Regnier, emphasized the bank’s focus on providing targeted and practical support, including advice on household budgeting and a toolkit for SMEs to help them through inflationary pressures.
The report also acknowledges that similar issues are believed to exist among commercial borrowers, particularly SMEs that have relied on government and traditional bank loans to survive.
Overall, the warning serves as a reminder of the challenges borrowers may face in the current economic climate and the importance of lenders being adequately prepared to support them.
If you or a client is having particular issues with debt repayment and you required legal advice, please speak to our experienced team today.