Credit Conditions Survey - 2018 Q2

Published on 12 July 2018

The 2018 Q2 survey was conducted between 21 May and 8 June 2018.

Lenders reported that the availability of secured credit to households was unchanged again in the three months to mid-June 2018 and expected no change over the next three months to mid-September 2018.
The availability of unsecured credit to households was reported to have been unchanged in Q2 and was expected to decrease slightly in Q3 (Chart 1). Credit scoring criteria for the granting of other unsecured loans were reported to have become significantly harder in Q2 and the proportion of applications that were approved fell slightly. The proportion of approvals of credit card loan applications increased significantly in Q2.
The overall availability of credit to the corporate sector was reported to have been unchanged again in Q2. Within this, the availability of credit provided to small businesses was reported to have increased in Q2. This is the first time lenders have reported greater credit availability to businesses of any size since 2015 Q3. The overall availability of credit to the corporate sector was expected to remain unchanged in Q3.

Lenders reported that household demand for secured lending for remortgaging increased in Q2, and expected demand to increase slightly in Q3. Demand for secured lending for house purchase was reported to have been unchanged in Q2, and was expected to be unchanged again in Q3.
Overall demand for unsecured lending was unchanged in Q2. Lenders expected an increase in the demand for total unsecured lending in Q3, comprised of an expected increase in demand for credit card lending and a slight decrease for other unsecured lending (Chart 2).
Lenders reported a significant increase in demand for corporate lending from small businesses in Q2, and expected demand to be unchanged in Q3 (Chart 3). For medium-sized PNFCs, demand for lending was reported to have been unchanged but was expected to increase in the next quarter. Demand for corporate lending from large PNFCs was reported to have decreased slightly in Q2 and was expected to decrease further in 2018 Q3.

Overall spreads on secured lending to households — relative to Bank Rate or the appropriate swap rate — were reported to have narrowed significantly in 2018 Q2, for the sixth consecutive quarter. A slight widening of spreads was expected in Q3 (Chart 4). Within this, spreads on both buy-to-let and prime lending were reported to have tightened significantly in Q2. A slight widening was expected for prime lending in Q3, but a slight narrowing was expected for buy-to-let lending.
Lenders reported that overall unsecured lending spreads tightened in Q2, driven by a significant narrowing in spreads on other unsecured lending products (Chart 5). Overall unsecured lending spreads were expected to widen slightly in Q3. The length of interest free period for balance transfers on new credit card lending decreased significantly again in Q2 and was expected to decrease slightly in Q3.
Spreads on lending to businesses narrowed for small and large sized firms in Q2, and were expected to be unchanged for both in Q3. Spreads on loans to medium-sized firms remained unchanged in Q2 but were expected to widen in the next 3 months.

Lenders reported that default rates on secured loans to households fell in Q2, and expected these to be unchanged in Q3. Losses given default on secured loans fell slightly in Q2, and were expected to be unchanged over 2018 Q3.
Default rates increased for total unsecured lending in Q2, driven largely by a significant increase in default rates on credit card loans (Chart 6). Lenders expected a further increase in default rates for total unsecured lending in Q3.
Lenders reported that default rates on loans to corporates increased for small and large sized businesses, but were unchanged for medium-sized PNFCs. Defaults rates for all sizes of businesses were expected to increase in Q3.

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