Banks reported the biggest increase in customers falling behind on credit card repayments since 2009 during the three months to June.

The Bank’s survey showed a net balance of 37.4% of lenders reporting rising default rates, up from 18.6% in the previous quarter.

Karim Haji, global and UK head of financial services at KPMG, said: “Secured lending demand was primarily driven by borrowers racing to lock in rates, capitalising on cuts to fixed-rate mortgage products by the major lenders. Some may have also wanted to secure deals ahead of any future inflation spikes.

“Unsecured lending demand was unchanged, suggesting that households held off taking on new credit to avoid higher interest rates on personal loans imposed by lenders.

“Default rates paint a mixed picture of the economic realities facing households. While defaults on secured loans were unchanged, tighter credit conditions, the ongoing impact of the Iran conflict and a cooling labour market triggered a rise in unsecured lending defaults, which is clearly where financial pressure is most acute.”

He added: “While major lenders have cut mortgage rates and oil prices have eased, the outlook for Q3 remains volatile. Stubborn inflation, lingering energy cost pressures and low consumer confidence linked to cost of living and job security concerns will continue to fuel economic and financial anxiety for many. Lenders must lean on AI and data analytics to identify financial vulnerabilities before they occur, so they can proactively support customers based on individual circumstances and challenges.”

The figures come after Bank of England data showed credit card borrowing increased by 12.1% in the year to May.