The Review covers data and intelligence gathered up to end-March 2018. Unless stated otherwise, the data reported cover lending in both sterling and foreign currency, expressed in sterling.
The total cost of bank funding increased a little in 2018 Q1 but remains low by historic standards. Sterling swap rates rose due to market expectations of increases in Bank Rate. Indicative measures of bank funding spreads also increased in Q1. Respondents to the Bank of England’s Bank Liabilities Survey report that transfer prices increased for the first time since 2016 Q2. UK lenders total funding volumes have increased over recent quarters.
Competition between lenders in the mortgage market has continued to intensify. Consequently, spreads over appropriate reference rates on new mortgage lending have fallen, despite increases in quoted rates on most mortgage products. Mortgage lending continues to grow steadily, with higher remortgaging in recent months. Consumer credit growth remains strong, although contributions from dealership car finance have declined slightly in recent months. Competition in the consumer credit market remains robust despite some continued signs of tightening in availability.
The availability and cost of corporate credit has remained favourable in recent quarters, though there have been some further signs of tightening in conditions at the margin. The cost of finance increased slightly following increases in swap rates. The rate of growth in net finance raised by UK businesses decreased over 2017 H2, mainly due to decreases in net equity issuance and bank lending growth. Demand has remained fairly subdued across all business sizes.
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