Fewer borrowers are likely to default on their loans and mortgages, Lloyds has said, as the banking group upped its forecasts for the UK economy. In fresh estimates released as part of its second-quarter results, Lloyds said it expected the economy to grow 0.8% in 2024 – double the rate of growth it expected back in April, when it predicted a 0.4% rise. Improving economic conditions are good news for Lloyds customers, who the bank says are less likely to fall behind on costly loan and mortgage payments. Lloyds, which is the UK’s largest mortgage lender and owns the Halifax brand, set aside just £44m for bad debts and defaults in the second quarter. That is down 89% from the £419m put aside during the same period last year when there were serious concerns over whether mortgage borrowers, already squeezed by the cost of living crisis, could afford higher interest rates. “We’ve seen both across individuals and small businesses, positive economic developments,” the chief executive, Charlie Nunn, said on Thursday. “There is a real resilience we’re seeing in the first half [of the year] and it’s linked to now three-quarters … of real wage growth. Many businesses’ cashflows are also strengthening.” The smaller provision for defaults helped offset a 9% drop in Lloyds’ net interest income, which is an important measure of profitability, and accounts for the difference between what a bank makes on loan charges versus what is paid out to savers. The drop came amid tougher competition, with Lloyds having to charge less for loans and pay out more to interest-seeking savers, to attract and maintain customers. Overall, pre-tax profit rose 5% in the three months to the end of June, to £1.7bn. Nunn suggested UK GDP and Lloyds’ finances could improve further if the Labour government’s growth plans succeeded. “Unlocking growth is not easy … And we’ve been working closely [with the government] to say what are the things that make a difference,” the chief executive said. “If we really do get some of the big infrastructure investments, some of the investments in our core sectors like energy; if we get confidence in [small and medium-sized enterprises] growing again; and then we get consumers who have confidence to spend, save and invest for the future; if those things happen, that’s when we thrive.”