Consumers hesitant on credit card spending

The Bank of England’s (BoE) credit conditions survey shows consumers were more hesitant about credit card spending in the closing months of 2019, with a balance of -13. 3% of lenders reporting a rise in demand for unsecured lending.

A balance of -6 .7% of respondents had increased the availability of unsecured credit. The survey also found that the amount of credit made available to corporates fell for the sixth successive quarter in Q4 2019. It fell to minus 9.2 in Q4, down from minus 3.5 in Q3, marking the fastest rate of decline since Q4 2008.

The balance for expected demand for credit for capital investment over the next three months fell to minus 27.4 from minus 18.5, the weakest since Q1 2009. The survey saw a balance of -12.7 % of lenders report a rise in demand for mortgages in the three months to December 20, down from +12. 5% in the previous quarter.

UK banks are expecting higher credit card borrowing in the coming months, overall demand for unsecured lending decreased in the last quarter of last year. This was driven by a reported decrease in demand for both credit card and other unsecured lending.

Lenders responding to the central bank’s survey expected the demand for credit card lending to increase in the first three months of this year. However, demand for other unsecured lending was expected to remain unchanged.

Lenders reported a decrease in demand for corporate lending from businesses of all sizes in the last quarter of last year. For the current quarter, however, they expect corporate lending to increase slightly for small businesses. They foresee a decrease for medium and large businesses.

The availability of unsecured credit to households was reported to have decreased slightly in the last quarter of 2019. It was however expected to remain unchanged in the current quarter.

Credit scoring criteria for total unsecured credit applications were reported to have tightened in Q4 of last year. But the proportion of total applications approved was unchanged and were expected to remain unchanged in this quarter. The overall availability of credit to the corporate sector was expected to decrease slightly in the first three months of 2020.