Credit Conditions Review - 2016 Q1

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 April 2016

The Review covers data and intelligence gathered up to end-March 2016. Unless stated otherwise, the data reported cover lending in sterling and foreign currency, expressed in sterling.


In 2016 Q1 long-term wholesale funding spreads for UK banks increased. Those higher wholesale funding spreads continued to push up transfer prices in 2016 Q1, according to respondents to the Bank Liabilities Survey, although responses were varied and not all lenders reported a rise. Retail deposit rates remained low, and the effective interest rate on household deposits decreased a little further in the three months to February. UK lenders continued to issue wholesale debt in 2016 Q1, and retail deposit growth increased slightly in the three months to February.

Annual growth in the stock of mortgage lending picked up further in recent months, reaching 3.0% in February. The 2016 Q1 Credit Conditions Survey suggested that this rise reflected an increase in demand for secured lending. Some of this strength in demand is likely to have come from the buy-to-let sector ahead of the stamp duty change. But recent discussions with the major UK lenders indicated that mortgage activity in the owner-occupier market had also been strong. Consumer credit continued to grow robustly reflecting both demand and supply factors. An important contributor to the pick up in consumer credit in recent years has been the increased provision of car finance through dealerships.

Net lending to UK non-financial businesses was positive in the three months to February 2016, and annual growth in the stock of lending reached 1.4%. For large companies, the cost of borrowing in UK corporate bond markets increased in 2016 Q1, but surveys suggest that credit availability remains plentiful and the cost of bank lending remains relatively low. Credit conditions facing SMEs were little changed in 2016 Q1, but have improved in recent years.

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