Credit Conditions Survey - 2012 Q2

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

Published on 28 June 2012

The availability of secured credit to households was reported to have been unchanged in the three months to end-May 2012. While lenders expected availability to remain unchanged in the next three months, they expected the availability to borrowers with high loan to value ratios to decline markedly.
Lenders reported that the availability of unsecured credit to households increased slightly in 2012 Q2. Availability was expected to increase slightly in 2012 Q3.
The overall availability of credit to the corporate sector was reported to have been broadly unchanged for small, medium and large companies in 2012 Q2. Availability was expected to remain unchanged for firms of all sizes in the next three months.
In contrast, lenders reported that the amount of credit made available to the commercial real estate sector had decreased slightly in the past three months, although it was expected to remain unchanged in Q3.

Lenders reported that demand for prime lending for house purchase had increased significantly in 2012 Q2, at least partly reflecting a pick-up ahead of the end of the stamp duty holiday. Demand for buy-to-let lending was unchanged. In the coming quarter, lenders expected overall demand for secured lending for house purchase to be broadly unchanged.
Demand for credit card lending was reported to have decreased over the past three months, whereas demand for other unsecured lending had increased. Lenders expected that pattern to reverse in Q3, with total unsecured loan demand slightly higher.
Lenders reported that demand for credit from small companies had risen in the three months to end-May 2012. But demand from medium-sized firms was unchanged and demand from large companies fell. Demand was expected to be unchanged for small firms, to increase for medium-sized firms and to fall slightly for large firms.

Lenders reported that the default rate on secured loans to households fell slightly in the three months to end-May. And losses given default on secured lending were broadly unchanged in Q2. Defaults and losses given default on secured lending were expected to be broadly unchanged in Q3.
Lenders reported that default rates on total unsecured lending decreased in the past three months, and were expected to stabilise in Q3. Lenders also reported a fall in losses given default on total unsecured lending, with a further small fall expected in Q3.
Lenders reported that default rates on loans to small firms fell during Q2, and were expected to fall slightly further in the next three months. And defaults on lending to large firms had fallen slightly but were expected to increase in Q3. Losses given default on loans to small businesses increased slightly in the three months to end-May and were expected to be unchanged in Q3. In contrast, lenders reported that losses given default on loans to large and medium-sized corporates were unchanged, but were expected to increase in the next three months.

The elevated cost of wholesale funding for banks has continued to be passed through to spreads on secured household lending, and lending to firms.
Lenders reported that overall spreads on secured lending to households — relative to Bank Rate or the appropriate swap rate — widened markedly in 2012 Q2. Lenders expected a further significant widening of spreads in Q3.
Spreads on overall unsecured lending were reported to have been broadly unchanged over the previous quarter. Lenders expected spreads to remain unchanged in 2012 Q3.
Lenders reported that spreads had widened significantly on lending to medium-sized firms, had widened for small firms but were unchanged for large firms. Spreads were expected to rise markedly on lending to firms of all sizes, and other financial corporations, in the next three months.