The availability of consumer credit dropped “significantly” in the first quarter of 2018, according to a survey of credit conditions published by the Bank of England. The Credit Conditions Survey asks banks and building societies about the past three months and the next three months as part of the Bank’s role in maintaining financial stability.
The Bank of England found that the availability of unsecured consumer credit fell during the first three months of 2018. Lenders surveyed reported unchanged secured credit availability from the previous three months and expected it to remain stable over the next quarter as well. The secured segment also saw reduced defaults, a trend expected to continue for the next quarter.
The Bank of England said the fall in supply was a driven by “a changing appetite to risk”, with lenders reporting “significantly” tightened credit scoring criteria for unsecured products. Demand for credit switched from credit cards to other types of unsecured loans, trend respondents expected to reverse in the next quarter. The decrease was “largely driven by a changing appetite to risk”, the report said.
Demand for mortgages from home-buyers was reported by lenders to have fallen significantly in the first quarter, driven by a decrease in borrowers’ appetites for prime and buy-to-let lending. Demand for re-mortgaging also fell.But lenders expect to see a marked pick-up in demand for mortgages between now and June.
There was no change in demand for credit from businesses in the first quarter but, looking ahead, lenders expect a pick-up in demand from medium-sized businesses alongside a slight increase in demand from larger firms. Demand for credit from small businesses is expected to remain unchanged over the next quarter.
Howard Archer, Chief Economic adviser at EY Item Club, said “The Bank of England has warned that banks risk becoming complacent in their lending behaviour so it should take some comfort from banks reportedly tightening their lending standards for granting unsecured consumer credit.”