More households across the UK are defaulting on their mortgages, with this trend expected to worsen in the run-up to Christmas.

The latest quarterly Credit Conditions Survey from the Bank of England (BoE) reveals that lenders are anticipating further increases in default rates for secured loans in the final quarter of the year.

This marks the seventh consecutive quarter of rising default rates on secured loans as families continue to struggle with the cost of living crisis. While lenders do not foresee any changes in mortgage availability through November, they anticipate an uptick in unsecured consumer loans.

Sarah Coles, personal finance columnist at Yahoo Finance UK and head of personal finance, Hargreaves Lansdown, said: “Mortgage default rates are mounting, and we’ve not yet reached the peak. Banks expect them to be up again by the end of the year.

"Given that those on lower incomes don’t tend to have mortgages, it demonstrates that higher mortgage rates are hitting middle-earners hard. Anyone who has overstretched themselves in the property market, or took on too many fixed costs while mortgage rates were lower, has faced a Herculean task when they remortgaged."

However, the default rates for total unsecured lending experienced a slight decline last quarter, attributed mainly to a reduction in credit card defaults.

Read more: UK house prices rising for first time in two years

Karim Haji, global and UK head of financial services at KPMG, said: "These latest figures suggest that many households are still struggling in the current environment. Although demand for unsecured lending remains stable, it is elevated compared to the beginning of the year. The decrease in default rates for unsecured lending is a positive sign and reflects the cautious approach to credit being adopted by households."

Lenders also reported that the length of interest-free periods on credit cards for balance transfers had increased in the past few months and was expected to increase slightly in the quarter ahead.

The length of interest-free periods on new credit cards for purchases also increased in the third quarter and was expected to increase slightly in the next few months.

Read more: Best UK mortgage deals of the week, 10 October

Demand for mortgages from home buyers and borrowers looking to remortgage is expected to increase in the next few months, the report found.

Meanwhile, demand for non-mortgage loans, including credit cards, is expected to decrease in the next few months.

Demand for corporate lending is expected to decrease slightly for small businesses, increase slightly for medium-sized businesses, and increase for large businesses, the report said.

As the economic landscape continues to shift, the outlook for UK households remains uncertain, with many bracing for further challenges in the months ahead.

Download the Yahoo Finance app, available for Apple and Android.