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UK Lenders To Tighten Credit Conditions In Q1: BoE Survey

uk dec18 19jan23 lt

UK lenders are set to tighten their credit conditions, applicable to both secured and unsecured lending to households in the first quarter of the year, the latest Credit Conditions Survey from the Bank of England showed Thursday.

Banks reported a fall in the availability of secured credit to households in the fourth quarter and they expect another fall over the first quarter.

Similarly, the availability of unsecured credit to households that include credit card and other unsecured lending, decreased in the three months ended November and lenders projected the availability to fall further in the next three months to February.

Regarding credit to the corporate sector, banks said the supply remained unchanged in the fourth quarter, but it is set to drop only slightly over the coming quarter.

Further, the survey showed that demand for secured lending for house purchase is set to fall again in the first quarter. Overall demand for unsecured lending also decreased in the fourth quarter, and was expected to drop slightly in the first quarter.

Lenders observed that demand for corporate lending from small and medium-sized businesses fell in the fourth quarter, while demand from large firms was unchanged.

For small businesses, corporate lending is expected to remain flat, while lenders forecast a fall in demand from medium and large businesses.

With respect to loan pricing, the survey showed that lenders forecast spreads on secured lending to households to widen slightly in the first quarter.

Spreads on lending to small and medium-sized businesses were expected to be unchanged over the next three months, while for large firms they were expected to widen. The survey was conducted between November 21 and December 9.

In order to tame inflation, the Bank of England has lifted its benchmark rate over the last nine straight sessions to the highest since October 2008. Towards the end of the year 2022, the bank softened the pace of tightening.

The interest rate hikes has started to influence the property market activity and in turn overall economic activity.

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