Credit Conditions Survey - 2011 Q1

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

Published on 31 March 2011

The availability of secured credit to households was reported to have been broadly unchanged in the three months to early March 2011. Lenders expected availability to increase in the next three months.
Lenders reported that the availability of unsecured credit to households had increased a little in 2011 Q1, though by less than expected. Availability was expected to increase further in Q2. Overall availability of credit to corporates was reported to have increased a little in 2011 Q1. But this increase was concentrated among large private non-financial corporations (PNFCs); availability to small businesses and medium-sized PNFCs was broadly unchanged. Lenders expected availability to increase a little in Q2.

Lenders reported that demand for secured lending for house purchase had fallen markedly once again in 2011 Q1, but only a small net balance of lenders expected demand to fall any further over the next three months. Demand for secured lending for remortgaging increased notably over the previous quarter and was expected to continue to increase in the coming quarter.
Demand for credit card lending was reported to have been unchanged over the previous three months. Demand for non credit card lending fell unexpectedly for the second consecutive quarter, but was again expected to increase in the next three months.
Lenders reported that demand for credit from the corporate sector varied by the size of business in 2011 Q1. Demand increased from large companies, was broadly unchanged from medium-sized PNFCs and fell sharply from small businesses. However, lenders expected demand from small businesses to increase in the coming quarter.

Lenders reported that the default rate on secured loans to households increased unexpectedly over the previous quarter, and was expected to increase further over the next three months. Losses given default were reported to have increased in 2011 Q1, and were expected to increase a little further in Q2.
Default rates on unsecured loans were reported to have fallen for the sixth successive quarter. But losses given default on credit card loans increased in 2011 Q1, and were expected to increase in the coming quarter. For non credit card loans, losses given default were broadly unchanged in 2011 Q1.
Over the previous three months, default rates on loans to PNFCs fell for medium and large companies, but rose for small businesses. In the same period, losses given default fell a little for medium and large companies, but increased for small businesses. Lenders broadly expected the same pattern in both default rates and losses given default to continue in the coming quarter.

Lenders reported that spreads on secured lending to households had fallen in 2011 Q1, in contrast with expectations of a slight increase. Spreads were expected to continue to fall in the coming quarter.
Spreads on credit card lending were reported to have increased slightly in the previous three months, but fallen significantly on other unsecured lending products. Spreads on unsecured lending were not expected to change in the coming quarter. Lenders reported that credit scoring criteria had loosened a little on credit card lending, but had tightened on non credit card lending. Lenders expected that credit scoring criteria would be tightened somewhat in the coming quarter.
Spreads on lending to medium and large PNFCs were reported to have fallen unexpectedly over the previous quarter. But spreads had increased on lending to small businesses, in line with expectations. Over the coming quarter, spreads were expected to fall a little for large PNFCs, remain unchanged for medium PNFCs and increase for small businesses.