Credit Conditions Survey - 2010 Q2

This quarterly survey of banks and building societies is aimed at improving our understanding of trends and developments in credit conditions.

Published on 01 July 2010

Lenders reported that the availability of secured credit to households had risen slightly in the three months to early June 2010. But availability was expected to fall back in the next three months, in part reflecting some lenders’ expectations that wholesale funding market conditions might tighten in that period.
Unsecured credit availability to households was reported to have remained broadly unchanged for a second consecutive quarter.
The overall availability of credit to corporates was reported to have increased in 2010 Q2, although by less than lenders had expected. Availability was expected to increase slightly in the next three months.

Demand for secured lending for house purchase was reported to have fallen somewhat in the past three months. Demand for secured lending for remortgaging was reported to have risen for the first time since 2008 Q4, but only a small balance of lenders was anticipating demand to increase further in the next three months.
Lenders reported that demand for unsecured credit increased in 2010 Q2, especially for non credit card lending. Lenders expected demand for credit card lending to stabilise in the next quarter and demand for non credit card lending to fall back a little.
In the past three months, demand for credit from private non-financial corporations (PNFCs) rose among small businesses but fell unexpectedly among large companies. Lenders expected demand from small businesses to rise further in the next three months, but anticipated a continued contraction in demand from large companies.

The default rate and losses given default on secured loans to households were reported to have fallen unexpectedly in the previous quarter. Abstracting from one-off effects, the default rate and losses given default were expected to remain stable in the coming quarter.
In line with lenders’ expectations, default rates on unsecured loans to households fell in 2010 Q2 while losses given default continued to rise. But, for the first time since 2008 Q1, lenders were not expecting losses given default for credit card lending to rise further in the coming quarter.
Default rates on loans to private non-financial corporations fell unexpectedly over the past three months among medium and large companies but rose for small businesses. Losses given default fell sharply among small businesses.

Lenders reported that spreads on secured lending to households had narrowed in 2010 Q2 and were expected to narrow further in Q3. Maximum loan to value ratios rose for a third consecutive quarter, but lenders were not anticipating that trend to continue in the next three months.
Terms on unsecured lending to households had been stable in the past three months. Lenders reported some relaxation in scoring criteria for credit card lending, the first instance of such a loosening in credit conditions since 2008 Q2.
Spreads on corporate lending continued to fall for medium and large PNFCs in the past quarter while they were broadly unchanged for small businesses. Lenders expected price terms to improve modestly for large PNFCs in the coming quarter but remain broadly stable for small and medium businesses.