Britain’s homeowners and small businesses are facing a fresh squeeze on credit as the fallout from the Iran crisis works its way through the financial system, with the Bank of England reporting the sharpest rise in mortgage defaults in more than a year.

The Bank’s latest Credit Conditions Survey, which gauges lenders’ appetite and the level of demand for new borrowing, showed that defaults on secured loans, chiefly residential mortgages, climbed to 6.2 per cent in the first three months of 2026. That is the highest reading since the final quarter of 2024, when defaults peaked at 7.8 per cent following a succession of interest rate rises by Threadneedle Street.

Unsecured lending told a bleaker story still. Defaults on credit cards, personal loans and overdrafts rose for a fourth consecutive quarter to 18.6 per cent, the highest level since the closing months of 2023, when the figure stood at 25.7 per cent. Taken together, the data suggests that household finances, which had begun to stabilise in the latter half of last year, are once again under serious strain.

According to the Bank’s report, demand for home loans and other forms of credit had remained buoyant in the run-up to the conflict, aided by a steady retreat in borrowing costs. That brief window of optimism has now slammed shut. Since hostilities escalated in the Middle East, lenders have rapidly repriced risk, pushing the average two-year fixed mortgage rate from around 4.8 per cent to beyond 5.5 per cent in a matter of weeks.

For a typical borrower with a £200,000 mortgage, that shift translates into roughly an extra £1,000 a year on repayments, a sum that few stretched households can comfortably absorb on top of stubborn food and energy bills.

Raj Abrol, chief executive of the risk platform Galytix, said the pain was radiating well beyond the front doors of British homeowners. “What started as a conflict in the Middle East is now showing up in borrowing costs right across the economy,” he said, warning that the turmoil had “spooked” the country’s big banks and triggered a surge in mortgage pricing.

Mr Abrol cautioned that defaults were likely to continue creeping upwards for some months yet, with inflation proving sticky and the cost of living crisis grinding on. As lenders retreat behind tighter underwriting standards, he argued, access to credit would become “a bigger challenge for consumers” and for the small firms that depend on them.

The deeper concern, he added, lies beneath the surface of the headline numbers. The cost of short-term corporate borrowing has more than doubled for lower-rated companies since late February, investment-grade credit spreads have widened by 15 basis points, and UK gilt yields briefly touched 5 per cent for the first time since 2008. When wholesale funding becomes dearer, the pain seldom stops with homeowners. It filters through to employers juggling payroll, to SMEs hunting for refinancing, and to consumers whose credit card rates and car finance deals quietly ratchet higher.

With close to a million fixed-rate mortgage deals due to expire by September and inflation drifting back towards 3.5 per cent, Mr Abrol warned that defaults risked moving from “a slow creep to something banks have to take seriously”.

Kenny MacAulay, chief executive of the accounting software platform Acting Office, struck a similar note of caution from the perspective of Britain’s small business community. He said that surging inflation and higher rates, against the backdrop of a stagnating economic outlook, would “heap fresh misery on homeowners and businesses alike” for as long as the Iran crisis rumbled on. In such an environment, he argued, building extra reserves and cash buffers was no longer optional but essential for any owner-manager hoping to keep the wolves from the door.

For SMEs already contending with weaker consumer demand, tighter trade credit and rising wage bills, the Bank’s survey is an unwelcome reminder that geopolitical shocks rarely stay confined to the headlines. They eventually land, with interest, on the balance sheet.

Amy Ingham

Amy is a newly qualified journalist specialising in business journalism at Business Matters with responsibility for news content for what is now the UK’s largest print and online source of current business news.

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The bipartisan leaders of Congress’ Joint Economic Committee are sounding the alarm about tax season scams that fraudsters may look to use on unsuspecting taxpayers as filing season winds down.

Taxpayers have until Wednesday, April 15, to file their 2025 tax return or request an extension, and scammers may take advantage of the approaching deadline to take advantage of taxpayers.

Scammers have victimized roughly one in four Americans with tax season scams, which have become increasingly common, particularly amid the rise of artificial intelligence (AI) and software that enables deepfakes.

JEC’s scam alert notes several tips for taxpayers to keep in mind when confronted with a potential scam. It warns taxpayers to beware of IRS impostor scams, which can be initiated by phone calls or via emails or texts using spoofed caller ID or addresses while purporting to be the IRS.

AVERAGE TAX REFUND UP NEARLY 11% FROM A YEAR AGO, IRS DATA SHOWS

Scammers are looking to exploit taxpayers during filing season. (iStock)

Taxpayers should be aware that the IRS almost always initiates outreach by mail and will never reach out on social media, as it only texts or emails in limited circumstances and doesn’t do so to demand immediate payment.

If they receive a suspicious message, taxpayers should refrain from scanning any QR codes or clicking on links as it could contain malware or refer them to a website designed to steal their information.

Outreach claiming to be from the IRS that is urgent or threatening, requests identifying information, or demands payment through nontraditional methods should be a red flag for taxpayers.

IRS REFUND TRACKER EXPLAINED: WHAT YOU NEED TO KNOW BEFORE THIS YEAR’S TAX FILING DEADLINE

Taxpayers should verify communications purporting to be from the IRS if they have concerns about what they’re being asked to provide. (Michael Bocchieri/Getty Images)

When the IRS reaches out, it won’t threaten to call law enforcement, demand the taxpayer’s driver’s license or business license, request immediate payment through gift cards, wire transfers or crypto, or direct the taxpayer to a non-IRS website.

Taxpayers can verify communications that purport to be from the IRS by reaching out to the agency directly by calling the IRS help line at 800-829-1040 or creating an IRS account online to access up-to-date information on their tax records. 

If they’re concerned about a website they’re on, they should confirm it’s actually the IRS website and not a sham website, which can be detected through suspicious signs like subtle misspellings or extra letters or words in the website’s URL.

IRS WARNS AMERICANS TO BEWARE OF DANGEROUS NEW SCAMS THIS TAX SEASON

The IRS generally initiates contact by mail, and won’t call or text demanding payment or personal information. (Jordan Vonderhaar/Bloomberg via Getty Images)

Third-party tax preparer scams are also something that taxpayers should be aware of when working with tax services or other non-IRS tax entities.

Taxpayers should be wary of tax preparers who demand high upfront fees or guarantee large refunds. They should also research unfamiliar companies through sites like the Better Business Bureau, or verify a preparer’s professionally required Preparer Tax Identification Number (PTIN) on the IRS website and avoid preparers who refuse to provide their PTIN.

Fraudsters may also seek to impersonate reputable tax preparation companies, so taxpayers should verify unexpected communications by calling the number on the company’s official website.

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The scam alert was issued by the bicameral Joint Economic Committee, which includes leaders from both the House and Senate on both sides of the partisan aisle. 

The panel is led by JEC Chairman Rep. David Schweikert, R-Ariz.; Ranking Member Sen. Maggie Hassan, D-N.H.,; Vice Chairman Sen. Eric Schmitt, R-Mo.; and Senior House Democrat Don Beyer of Virginia issued the warning to taxpayers on Thursday.

SHANGHAI — Tesla Inc.’s Model Y surged to the top of China’s passenger vehicle sales rankings in March 2026, registering 39,827 retail units and outpacing every electric vehicle, hybrid and internal combustion engine model in the world’s largest auto market, according to data cited by prominent EV analyst Sawyer Merritt.

The achievement marks a striking comeback for the premium electric SUV in a brutally competitive environment dominated by low-cost domestic brands. Priced between roughly 263,500 and 313,500 yuan (about $36,500 to $43,400), the Model Y stood alone among the top 10 as the only vehicle commanding a premium above 200,000 yuan, while many rivals — including the Geely Galaxy Xingyuan and BYD Yuan UP — sell for under 100,000 yuan.

The March retail registrations data, shared Friday on X by Merritt, underscore Tesla’s enduring brand strength and product appeal even as the broader Chinese new energy vehicle sector grapples with intense price wars, subsidy phase-outs and slowing overall demand. The Model Y’s performance beat out mass-market favorites across sedans, SUVs and MPVs, highlighting consumer preference for its combination of range, technology, safety features and over-the-air software updates.

Tesla’s Shanghai Gigafactory, the company’s largest production hub, played a central role. Wholesale shipments from the plant — which include both domestic deliveries and exports — reached 85,670 vehicles in March, up 8.7% from a year earlier and a robust 46.2% rebound from February, according to the China Passenger Car Association. While exact Model Y breakdowns within wholesale figures are not public, analysts attribute much of the strength to sustained Model Y output paired with aggressive export growth.

Exports from Shanghai hit a quarterly record in the first three months of 2026, helping offset softer domestic retail trends earlier in the year. Q1 retail sales for Tesla in China fell about 16% year-over-year overall, but the March surge in Model Y registrations signals a potential inflection point as the refreshed Model Y lineup gains traction and seasonal factors ease.

The results come amid a challenging backdrop for the Chinese auto industry. A brutal price war has seen domestic EV makers slash prices aggressively to stimulate demand after the expiration of certain tax incentives. Brands like BYD, Geely and Xiaomi have flooded the market with affordable options, yet the Model Y’s premium positioning and superior ecosystem appear to have resonated with buyers willing to pay more for perceived quality, advanced driver assistance and brand prestige.

Commentators on social media noted the irony: despite cheaper alternatives boasting features like larger screens or massage seats, Chinese consumers continue to favor the Tesla for its software sophistication, build quality and long-term value. One analyst highlighted that “software, safety and brand ecosystem are still winning out over pure cost-cutting.”

Tesla has maintained a lean but highly efficient operation in China. The Shanghai factory has repeatedly demonstrated its ability to scale production rapidly and adapt to shifting export demands. In March alone, exports contributed significantly to the wholesale total, with some estimates suggesting Tesla shipped tens of thousands of vehicles overseas — a strategic move that keeps the plant running at high utilization even when domestic retail softens.

Globally, the Model Y continues its reign as the world’s best-selling passenger vehicle for the third consecutive year, with cumulative sales surpassing 4 million units by early 2026. Tesla itself highlighted the milestone on Chinese social media earlier this year, citing data from research firms including JATO Dynamics, Statista and Focus2Move.

In China specifically, the Model Y has shown remarkable resilience. February 2026 retail sales already showed strength with the SUV leading SUV rankings, and March’s broader market-topping performance extends that momentum. The vehicle’s success spans segments, appealing to urban families, tech enthusiasts and even ride-hailing fleets seeking reliable, low-operating-cost electric options.

Industry observers point to several factors behind the March surge. Tesla’s recent software updates, including enhanced Full Self-Driving capabilities tailored for Chinese roads, have boosted appeal. The company has also expanded its Supercharger network and service infrastructure, addressing range anxiety more effectively than many domestic newcomers. Additionally, the refreshed Model Y — sometimes referred to in local markets with extended-wheelbase variants — has helped refresh consumer interest.

Yet challenges remain. Tesla’s overall China retail sales for Q1 2026 trailed some expectations, with analysts noting a post-holiday slowdown and the impact of aggressive pricing by local competitors. Some reports indicate domestic retail registrations for Tesla vehicles dipped in the first two months before the March rebound. Exports have become a critical buffer, with shipments to Europe and other markets surging more than 160% in Q1 compared to the prior year.

The price premium narrative is particularly noteworthy. While many top-10 models in March sold for under 150,000 yuan, the Model Y’s higher sticker price did not deter buyers. Industry insiders attribute this to Tesla’s strong resale value, lower total cost of ownership over time due to minimal maintenance needs, and the intangible prestige associated with the brand. In a market where status still matters, owning a Tesla remains a statement.

Broader implications for the global EV industry are significant. China accounts for a massive share of worldwide electric vehicle demand, and Tesla’s ability to lead sales there despite intense local competition reinforces its technological edge. The Shanghai Gigafactory’s dual role as both a domestic powerhouse and export engine gives Tesla unique flexibility that pure-play Chinese manufacturers lack.

Looking ahead, analysts will watch April and May figures closely for signs of sustained momentum. Tesla has teased further updates to its China lineup, including potential localization of more features and continued integration of advanced AI capabilities. The company’s upcoming earnings report, expected later this month, will likely provide more color on China performance and global delivery trends.

For now, the March data offers a clear win for Tesla in one of its most strategically important markets. As the price war rages and new entrants flood showrooms with ever-cheaper options, the Model Y’s ability to claim the outright top spot underscores a powerful message: in China’s hyper-competitive auto landscape, quality, innovation and brand trust can still trump rock-bottom pricing.

The development also carries symbolic weight. Just weeks after broader Q1 wholesale figures showed Tesla holding its own against giants like BYD and Geely, the retail registration crown for the Model Y highlights consumer-level demand that goes beyond factory shipments. It suggests that even as the market matures and competition intensifies, Tesla’s formula continues to resonate with a significant segment of Chinese buyers.

As the EV transition accelerates worldwide, Tesla’s performance in China serves as a bellwether. With the Model Y once again proving its mettle against a sea of lower-priced alternatives, the company appears poised to maintain its leadership position in the premium segment while leveraging its massive Shanghai operation for both local and global growth.