The 2018 Q1 survey was conducted between 19 February and 9 March 2018.
Supply
- Lenders reported that the availability of secured credit to households was unchanged in the three months to mid-March 2018 and expected no change over the next three months to mid-June 2018.
- The availability of unsecured credit to households was reported to have decreased significantly in Q1 (Chart 1). This was largely driven by a changing appetite to risk, with lenders also reporting that the credit scoring criteria for granting both credit card and other unsecured loan applications tightened significantly in Q1. However, lenders expected the availability of unsecured credit to remain unchanged in Q2.
- The overall availability of credit to the corporate sector was reported to have been unchanged again in Q1, with no change expected in Q2.
Demand
- Demand for secured lending for house purchase was reported to have decreased significantly in Q1, driven by a fall in demand for both prime and buy-to-let lending, but lenders expected a marked pick-up in demand in Q2 (Chart 2). Lenders reported that household demand for secured lending for remortgaging also decreased significantly in Q1, but expected demand to pick-up again markedly in Q2.
- Overall demand for unsecured lending was reported to have decreased in Q1. Within this, there was a significant decrease in demand for credit card lending but an increase in demand for other unsecured lending (Chart 3). Lenders expected this to reverse in the next quarter, anticipating an increase in credit card lending alongside a decrease in other unsecured lending.
- Lenders reported no change in demand for corporate lending from businesses of all sizes. Lenders expected an increase in demand from medium-sized business alongside a slight increase in demand from large businesses in Q2, while demand from small businesses was expected to remain unchanged.
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 Q1, for the fifth consecutive quarter. At +60, the net percentage balance was the highest on this question since the survey began (Chart 4) and a further significant narrowing was expected in Q2. This was also the case for spreads on both prime and buy-to-let lending.
- Lenders reported that overall unsecured lending spreads tightened significantly in Q1, but expected them to be unchanged in Q2. The length of interest-free period for balance transfers on new credit card lending decreased significantly again in Q1.
Spreads on lending to businesses were unchanged for small and large-sized firms in Q1, but widened on loans to medium-sized firms (Chart 5). Spreads were expected to widen on lending to businesses of all sizes in Q2.
Defaults
- For the fourth consecutive quarter, lenders reported that default rates on secured loans to households fell significantly in Q1, and expected these to fall further in Q2. Losses given default on secured loans were again unchanged in Q1.
- Default rates were reported to have increased on total unsecured loans in Q1, with a further slight increase expected in Q2. In Q1, these increases were slightly larger for other unsecured loans relative to credit card loans, although the survey balances were positive for both (Chart 6). Losses given default were reported to have fallen in Q1, although they were expected to rise again in Q2.
- Lenders reported that default rates on loans to corporates decreased for small businesses, while increasing slightly for medium private non-financial corporations (PNFCs) and significantly so for large PNFCs. Losses given default on corporate loans for businesses of all sizes were reported to have been unchanged in Q1 and were expected to remain unchanged in Q2.
Credit Conditions Survey - 2018 Q1
Results for annex 1, 2 and 3