Credit Conditions Review - 2015 Q3

This publication presents our assessment of the latest developments in bank funding and household and corporate credit conditions. It draws on sources including the results of the Bank Liabilities Survey and Credit Conditions Survey, other statistics we have collected and surveys from other organisations.
Published on 13 October 2015

The Review covers data and intelligence gathered up to end-September 2015. Unless stated otherwise, the data reported cover lending in both sterling and foreign currency, expressed in sterling.


Longer-term wholesale funding costs for UK banks increased, on average, in 2015 Q3 but remained significantly below levels seen a few years ago. Over the quarter, wholesale funding spreads rose. Swap rates initially rose but subsequently ticked down in August and September. Retail funding spreads also increased slightly in Q3. Higher wholesale funding spreads had driven a significant increase in transfer prices in Q3, according to respondents to the Bank Liabilities Survey. Transfer prices were expected to fall back a little in Q4. Wholesale term funding issuance by UK lenders was similar in 2015 Q3 to the previous quarter, while
retail deposit growth picked up a little.

Secured lending increased in the three months to August, with the net flow rising to its highest level since 2008. This was consistent with both the increase in demand for secured lending reported in the 2015 Q3 Credit Conditions Survey, particularly from the buy-to-let sector, and the reported increase in secured credit availability. Consumer credit continued to grow robustly. Secured lending and consumer credit are likely to have been supported by the low cost of credit, with most quoted and effective rates continuing to fall in 2015 Q3, against a backdrop of high levels of competition between lenders.

Net lending to UK businesses fell back, on average, in the three months to August. But total net finance raised, which also includes funds raised in capital markets, remained positive. Most evidence suggests that the availability of credit to SMEs continued to increase over recent months, and that the supply of credit to large companies remained plentiful. Demand for lending was reported to have increased across all business sizes in Q3 according to respondents to the Credit Conditions Survey, though survey evidence suggests that the overall level of demand remained subdued.

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