Economy

United Kingdom lenders see sharp tightening of consumer credit in coming months

United Kingdom banks are planning the biggest squeeze in consumer credit since late 2008, when the economy was in the depths of recession, according to a Bank of England survey.

The survey shows that the net balance of lenders' expectations for the availability of unsecured lending over the next three months has fallen to minus 28.6 per cent, down from 16.2 per cent previously, the lowest since the 2008 recession.

Consumer credit grew at an annual rate of 9.8 per cent in August, according to the Bank, reflecting booming vehicle loans and credit card borrowing.

"Although competition and growth in this market remain strong, there are tentative signs of a slight tightening in lending criteria, with lenders expecting further tightening in Q4", the Bank said. A significant decrease in availability is expected for the fourth quarter.

Credit availability for businesses remained stable during the third quarter although demand dipped a touch from its earlier level.

Lending costs rose for businesses during the third quarter while mortgage loan pricing came down, a function of banks competing fiercely for market share, while the price of unsecured credit to consumers held steady despite an increase in default rates.

Demand for both credit card and other unsecured lending products was reported to be unchanged in third quarter, and was expected to be unchanged again in the fourth quarter.

Lenders logged a fall in demand for corporate lending for businesses of all sizes - and small businesses in particular.



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