Credit Conditions Survey - 2013 Q4

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

Published on 08 January 2014

The availability of secured credit to households was reported to have increased in the three months to early December 2013, particularly for borrowers with higher loan to value ratios. Lenders expected a significant increase in availability over the next three months.
Lenders reported that the availability of unsecured credit to households was unchanged in 2013 Q4, following reported increases in the previous four quarters.
The overall availability of credit to the corporate sector increased significantly in Q4, according to lenders, and a further increase was expected in 2014 Q1. Lenders reported that the availability of credit had increased for small businesses and large private non-financial corporations (PNFCs).

Demand for secured lending for house purchase was reported to have increased significantly in 2013 Q4, with the net percentage balance rising to its highest level since the survey began in 2007. Demand for secured lending for remortgaging also increased significantly in 2013 Q4.
Lenders reported that demand for credit card lending fell in Q4, but expected demand to increase slightly over the next three months. Demand for other unsecured lending products, such as personal loans, decreased significantly in Q4, although an increase in demand was expected in 2014 Q1.
Demand for lending from small businesses was reported to have remained flat in Q4, demand from medium-sized companies increased significantly and demand from large PNFCs increased slightly. Lenders expected credit demand to increase across all firm sizes in 2014 Q1, with significant increases expected for small businesses and large PNFCs.

Lenders reported that both default rates and losses given default on secured loans to households fell significantly in 2013 Q4, and were expected to fall significantly further in 2014 Q1.
Default rates on unsecured lending fell in Q4, driven by lower default rates on credit cards. Losses given default remained unchanged across all unsecured lending.
Default rates on lending to small businesses were reported to have fallen significantly in Q4. For medium-sized companies default rates remained unchanged and for large PNFCs they fell over the quarter. Losses given default fell across all firm sizes in 2013 Q4 and were expected to fall again over the next three months.

Lenders reported that overall spreads on secured lending to households — relative to Bank Rate or the appropriate swap rate — narrowed significantly for the fifth consecutive quarter in Q4. Lenders expected a slight further narrowing in 2014 Q1.
Spreads on credit card lending were reported to have remained unchanged in Q4. In contrast, spreads on other unsecured lending products tightened significantly, and a further significant tightening was anticipated over the next three months.
Spreads on corporate lending fell in Q4, with significant reductions reported for medium-sized companies and large PNFCs, and a slight reduction reported for small businesses. Over the next three months, lenders expected spreads to tighten further for medium-sized companies and large PNFCs, and to be little changed for small businesses.