Credit Conditions Survey - 2011 Q4

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

Published on 05 January 2012

The availability of secured credit to households was reported to have been broadly unchanged in the three months to mid-December 2011. Lenders expected availability to increase a little in the next three months.
Lenders reported that the availability of unsecured credit to households had increased in 2011 Q4. Availability was expected to increase a little further in 2012 Q1.
The availability of credit to the corporate sector was reported to have been broadly unchanged for small and large companies in 2011 Q4. This was expected to remain broadly unchanged for large companies in Q1, while availability to small businesses was expected to increase. Credit availability had increased slightly for medium-sized companies in 2011 Q4 and was expected to increase further in Q1.
Although lenders expected a small increase in overall credit availability in the coming three months, factors such as the economic outlook and tighter wholesale funding conditions were expected to impact negatively on credit availability. Lenders commented that developments in the euro area and their impact on banks’ funding conditions would be a key determinant of credit availability over the coming quarter.

Lenders reported that demand for secured lending for house purchase had fallen in 2011 Q4. Demand for buy-to-let lending, however, was reported to have picked up. In the coming quarter, lenders expected demand for both prime lending and buy-to-let lending to fall slightly.
Demand for unsecured lending was reported to have decreased over the past three months. Lenders expected demand for credit card lending to fall further in the next three months, although demand for other unsecured lending was expected to increase slightly.
Lenders reported that credit demand from small businesses fell sharply in 2011 Q4 and was expected to fall further in Q1. Demand from large and medium-sized companies was reported to have been broadly unchanged over the past three months but was expected to fall slightly in the coming quarter.

Lenders reported that the default rate on secured loans to households fell over the previous quarter and was expected to fall further in 2012 Q1. Losses given default were reported to have increased in 2011 Q4 and a further small pickup was expected in the coming quarter.
Default rates on unsecured lending to households were reported to have fallen sharply in Q4, continuing the trend that had been observed throughout 2010 and 2011. However default rates were expected to stabilise over the coming three months. Losses given default were reported to have fallen slightly in Q4 and were expected to fall further in Q1.
Lenders reported that default rates on loans to large and medium-sized companies picked up in Q4 and were expected to increase further in the coming quarter. Losses given default were reported to have been broadly stable but were expected to pick up in Q1. For small businesses, default rates and losses given default had decreased and were expected to remain broadly flat in Q1.

Lenders reported that spreads on secured lending to households — relative to Bank Rate or the appropriate swap rate — narrowed slightly in 2011 Q4. Lenders expected spreads to fall further in Q1.
Spreads on overall unsecured lending were reported to have been broadly unchanged over the previous quarter. Lenders expected spreads to pick up slightly in 2012 Q1.
For corporates of all sizes, spreads on lending were reported to have widened in the past three months and were expected to widen markedly further in the coming quarter. Lenders commented that the pass-through of increased funding costs was among the factors driving the widening of spreads.