Credit Conditions Survey - 2017 Q4

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

Published on 11 January 2018

The 2017 Q4 survey was conducted between 20 November 2017 and 8 December 2017.

Lenders reported that the availability of secured credit to households was unchanged in the three months to mid-December 2017 and expected no change over the next three months to mid-March 2018.
The availability of unsecured credit to households was reported to have decreased again in Q4, such that reductions were reported in all four quarters of 2017 (Chart 1). Lenders expected a significant decrease in Q1. Credit scoring criteria for granting total unsecured loan applications tightened again in Q4, and lenders expected them to tighten significantly further in Q1.
The overall availability of credit to the corporate sector was reported to have been unchanged again in Q4.

Lenders reported that household demand for secured lending for remortgaging increased significantly in Q4. At +49, the net percentage balance suggested the largest quarter-on-quarter change in demand for this type of lending since the falls reported in early 2009. Demand for secured lending for house purchase was reported to have increased slightly in Q4.
While demand for credit card lending was reported to be broadly unchanged in Q4, demand for other unsecured lending was reported to have fallen significantly (Chart 2). This is the first material reported fall in demand for either component of unsecured lending since 2015 Q4. No further changes in demand for unsecured lending were expected for Q1.
Lenders reported a slight decrease in demand for lending from large PNFCs, and expected this to decrease significantly in Q1 (Chart 3). Overall demand for corporate lending from small and medium businesses was reported to be unchanged in Q4.

Overall spreads on secured lending to households — relative to Bank Rate or the appropriate swap rate — were reported to have narrowed significantly in Q4 and were expected to be unchanged in Q1 (Chart 4). This was the case for spreads on both buy-to-let and prime lending.
Lenders reported that overall unsecured lending spreads tightened in Q4, and expected them to be unchanged in Q1. The length of interest free period for balance transfers on new credit card lending decreased significantly in Q4 and was expected to decrease significantly again in Q1.
Spreads on lending to businesses were unchanged for medium-sized firms in Q4, but widened on loans to small businesses and widened slightly for large PNFCs (Chart 5). They were expected to widen on lending to small and medium sized businesses in Q1.

Lenders reported that default rates on secured loans to households fell significantly in Q4, and expected these to fall further in Q1. Losses given default on secured loans were unchanged in Q4 and were expected to remain unchanged in Q1.
Default rates and losses given default were reported to have increased for total unsecured lending, with further increases for both expected in Q1. In Q4, these increases were reported to have been slightly larger for credit card relative to other unsecured lending, although the survey balances were positive for both (Chart 6).
Lenders reported that default rates on loans to corporates increased slightly for small businesses, while remaining unchanged for medium and large PNFCs. Losses given default on corporate loans were reported to have been unchanged in Q4 for medium and large businesses, but decreased slightly for small businesses.

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