Credit Conditions Survey - 2010 Q4

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

Published on 06 January 2011

Lenders reported that the availability of secured credit to households was broadly unchanged in the three months to early December 2010 and was expected to remain at a similar level over the next three months. Some lenders reported that availability had been constrained somewhat by expectations for house prices.
Unsecured credit availability to households was reported to have fallen a little in the previous quarter, but lenders expected that availability would increase a little in the next quarter.
The overall availability of credit to corporates was broadly unchanged in 2010 Q4, following a period of rising availability for most of the previous two years, and was expected to remain broadly unchanged in 2011 Q1. Lenders reported that the availability of credit to small businesses had increased a little in 2010 Q4, for the third consecutive quarter, and expected a further increase over the coming quarter.

Lenders reported that demand for secured lending for house purchase had fallen markedly in 2010 Q4 and was expected to fall further in 2011 Q1. Demand for secured lending for remortgaging was reported to have risen in 2010 Q4, but this was not expected to continue into the next quarter.
Over the previous three months, households’ demand for credit card lending was reported to have been unchanged while demand for non credit card lending fell. Lenders expected that demand for unsecured lending would increase a little over the next three months.
Demand for credit from medium and large private non-financial corporations (PNFCs) was reported to be broadly unchanged in 2010 Q4. Demand from large companies was expected to rise in 2011 Q1. Among small businesses, overall demand for credit was unchanged over the previous quarter, but was expected to fall over the next quarter.

Lenders reported that the default rate on secured loans to households remained broadly unchanged in 2010 Q4. However, losses given default rose for the first time since 2009 Q2, and were expected to rise a little further over the next quarter.
Default rates on unsecured loans to households were reported to have fallen for the fifth consecutive quarter. Losses given default for credit card lending fell over the previous quarter but rose unexpectedly for non credit card lending.
Over the previous three months, default rates on loans to PNFCs fell for large companies, but were unchanged for medium companies. Default rates and losses given default were expected to fall over the next three months for large and medium PNFCs. For small businesses, the default rate and losses given default rose in 2010 Q4 and were expected to increase further over the next quarter.

Lenders reported that spreads on secured lending to households had fallen in 2010 Q4, but were expected to rise a little in 2011 Q1. Credit scoring criteria stabilised after two quarters of slight tightening.
Spreads on non credit card lending fell in 2010 Q4, while spreads on credit card lending were unchanged. Spreads on unsecured lending were expected to fall a little in 2011 Q1. Lenders expected some easing of credit scoring criteria in 2011 Q1.
Over the previous quarter, spreads on corporate lending continued to fall for large companies, but were unchanged for medium PNFCs and rose for small businesses. Lenders reported that covenants had tightened for small businesses in 2010 Q4.