HBOS reveals extent of consumer strain

Consumers are struggling to pay back credit card debts and keep up with mortgage repayments as the economic slowdown takes hold, the UK's biggest mortgage lender revealed today.

Figures from HBOS showed the number of customers falling behind with payments on loans they had taken out with the bank had increased by 6% in the first half of the year, as the consumer environment becomes more difficult.

In total within its retail division impairment losses climbed to £722 million, from £678 million in the first half of last year. The group said that this reflected 'an increased charge in respect of secured loan impairments, offset by a reduction in the level of unsecured impairment losses.'

HBOS said that within its retail arm, total impaired secured loans, which account for loans secured on an asset, increased to £5.1 billion, from £4.2 billion at the end of 2007. Within that, mortgages in arrears climbed to 1.95%, from 1.67%.

Credit card loan impairments, which come under unsecured loans, have also risen, climbing from 15% to 15.6%. This suggests consumers are having problems repaying bills on time.

However, overall impairments on unsecured loans fell in total to £2.2 billion, from £2.3 billion.

The majority of this was driven by a deduction in impairments on personal loans, which decreased to 14.4% from 16.1%, as well as on bank accounts.

The group warned it expected the situation to worsen. It stated: 'We are not seeing any material stress in our impairment performance but, given the continuing deterioration of the external environment, some deterioration in the second half can be expected.'