The 2017 Q2 survey was conducted between 22 May 2017 and 9 June 2017.
Supply
- The availability of secured credit to households was reported to have increased in the three months to mid-June 2017 (Chart 1), driven by lenders’ market share objectives. But lenders expect availability to fall slightly over the next three months to mid-September, reflecting a changing appetite for risk. Lenders expect that slight reduction in availability to affect only borrowers with loan to value (LTV) ratios of more than 75%, and in particular those with a LTV ratio of more than 90%.
- Lenders reported that the availability of unsecured credit to households had decreased in Q2 (Chart 2), and expected a further decrease in Q3. A changing appetite for risk was reported to be an important driver of this in Q2 and Q3, with a changing economic outlook also affecting expectations for Q3. Credit scoring criteria for granting both credit card and other unsecured loans were reported to have tightened again in Q2, with lenders expecting further tightening in Q3.
- The availability of credit to the corporate sector was reported to have been unchanged again in Q2, with no change expected in Q3.
Demand
- Lenders reported that demand for secured lending for house purchase was unchanged in Q2 (Chart 3). Within this, demand for prime lending increased and demand for buy-to-let lending decreased significantly. Lenders expected total demand for secured lending for house purchase to increase in Q3, driven by an increase in buy-to-let lending and a slight increase in prime lending. Demand for remortgaging was reported to have decreased slightly in Q2, but was expected to be unchanged in Q3.
- Demand for credit card lending was reported to have increased slightly in Q2, but was expected to be unchanged in Q3. Lenders reported an increase in demand for other unsecured lending products in Q2, but expected no change in Q3.
- Lenders reported significantly increased demand for corporate lending from both small and medium-sized businesses in Q2, the first increase reported for either since 2016 Q2 (Chart 4). Demand from small-sized businesses was expected to fall back in Q3, while no change was anticipated for medium-sized businesses. Demand for lending from large companies was reported to have decreased significantly in Q2, and was expected to fall further in Q3. As in recent quarters, lower capital investment was reported to be acting as a drag on corporate demand for credit, although balance sheet restructuring and demand from the commercial real estate sector were reported to have pushed up on demand in Q2.
Loan pricing
- Overall spreads on secured lending to households — relative to Bank Rate or the appropriate swap rate — were reported to have narrowed significantly in Q2 (Chart 5). This was the case for spreads on both buy-to-let and prime lending. Lenders expected a further significant narrowing in spreads in Q3.
- Lenders reported that spreads on credit cards widened in Q2. In contrast, spreads on other unsecured lending products were reported to have narrowed significantly, and were expected to narrow further in Q3. The length of interest free periods for both balance transfer offers and purchases on credit card lending were reported to have increased significantly in Q2. Lenders anticipated the length of interest free periods on balance transfers to decrease in Q3, for the first time since the introduction of the question in 2015 Q1.
- Spreads on lending to small businesses were reported to be unchanged in Q2 (Chart 6). Lenders reported that spreads on lending to medium businesses widened in Q2, and on lending to large businesses narrowed significantly. Lenders expected spreads to remain unchanged on lending to firms of all sizes in Q3.
Defaults
- Lenders reported that default rates on secured loans to households fell significantly in Q2, and expected these to fall slightly further in Q3. Losses given default on secured loans to households remained unchanged in Q1, but were expected to increase slightly in Q3.
- Default rates on both credit card and other unsecured lending to households were reported to have increased significantly in Q2, and were expected to increase further on credit card lending in Q3. Losses given default were reported to be unchanged on both credit card and other unsecured lending, and were expected to be unchanged again in Q3.
- Lenders reported that default rates on loans to businesses of all sizes decreased in Q2, and significantly so on loans to medium businesses. But lenders expected an increase in the default rate on loans to firms of all sizes in Q3. Losses given default on loans were reported to have decreased slightly for small businesses in Q2, but were unchanged for medium and large businesses.
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Results for Annex 1, 2 and 3