Credit Conditions Survey - 2019 Q3

This quarterly survey of banks and building societies is aimed at improving our understanding of trends and developments in credit conditions.
Published on 17 October 2019

Overview

As part of its mission to maintain monetary stability and financial stability, the Bank needs to understand trends and developments in credit conditions. This quarterly survey of bank and building society lenders is an input to this work. Lenders are asked about the past three months and the coming three months. The survey covers secured and unsecured lending to households; and lending to non-financial corporations, small businesses, and to non-bank financial firms.

This report presents the results of the 2019 Q3 survey. It was conducted between 2 and 20 September 2019. Guidance on interpreting the survey and copies of the questionnaires are available at the end of this page.

Additional background information on the survey can be found in the 2007 Q3 Quarterly Bulletin article ‘The Bank of England Credit Conditions Survey’.

The 2019 Q4 Credit Conditions Survey will be published on 16 January 2020.

Supply

  • Lenders reported that the availability of secured credit to households was unchanged in the three months to end-August 2019 (Q3) but was expected to increase slightly over the next three months to end-November 2019 (Q4).
  • The availability of unsecured credit to households was reported to have decreased slightly in Q3 and was expected to remain unchanged in Q4 (Chart 1). Credit scoring criteria for total unsecured loan applications were reported to have tightened in Q3, and the proportion of total applications approved has decreased. Total unsecured loan approvals were expected to remain unchanged in Q4.
  • The overall availability of credit to the corporate sector was reported to have remained unchanged in Q3, and this was the case for small, medium and large businesses (Chart 2). The overall availability of credit to the corporate sector was expected to decrease in Q4.

Chart 1 Household unsecured credit availability(a)(b)

(a) Net percentage balances are calculated by weighting together the responses of those lenders who answered the question. The blue bars show the responses over the previous three months. The red diamonds show the expectations over the next three months. Expectations balances have been moved forward one quarter so that they can be compared with the actual outturns in the following quarter.
(b) Question: ‘How has the availability of unsecured credit provided to households changed?’.
(c) A positive balance indicates that more unsecured credit is available.

Chart 2 Corporate credit availability(a)(b)

(a) See footnote (a) to Chart 1.
(b) Question: 'How has the availability of credit provided to the corporate sector overall changed?’.
(c) A positive balance indicates an increase in credit availability.

Demand

  • Lenders reported that demand for secured lending for house purchase increased in Q3, and was expected to remain unchanged in Q4. Demand for secured lending for remortgaging decreased in Q3, but was expected to increase in Q4 (Chart 3).
  • Overall demand for unsecured lending decreased slightly in Q3; this was driven by a reported slight decrease in demand for credit card lending. Lenders expected the demand for credit card lending to remain unchanged in Q4 while demand for other unsecured lending was expected to decrease slightly (Chart 4).
  • Lenders reported a slight decrease in demand for corporate lending from small and large businesses, and a decrease in demand from medium businesses in Q3 (Chart 5). Lenders expected demand for corporate lending in Q4 to remain unchanged for small businesses, to decrease for medium-sized businesses, and to decrease slightly for large businesses.

Chart 3 Demand for secured lending for house purchases and remortgaging(a)(b)

(a) See footnote (a) to Chart 1.
(b) Question: ‘How has demand for secured lending for house purchase/remortgaging from households changed?’.
(c) A positive balance indicates an increase in demand.

Chart 4 Demand for unsecured lending by loan type(a)(b)

(a) See footnote (a) to Chart 1.
(b) Question: ‘How has demand for credit card/other unsecured lending from households changed?’.
(c) A positive balance indicates an increase in demand.

Chart 5 Corporate demand for lending by firm size(a)(b)

(a) See footnote (a) to Chart 1.
(b) Question: ‘How has overall demand for lending from small businesses, medium PNFCs and large PNFCs changed?’.
(c) A positive balance indicates an increase in the default rate.

Loan pricing

  • Overall spreads on secured lending to households – relative to Bank Rate or the appropriate swap rate – were reported to have widened in Q3, however they were expected to tighten slightly in Q4.
  • Lenders reported that overall unsecured lending spreads widened in Q3, and were expected to remain unchanged in Q4. The length of interest free periods for balance transfers and new purchases on new credit card lending both decreased in Q3 and were expected to decrease in Q4.
  • Spreads on corporate lending to small and large businesses were unchanged in Q3, but had widened for medium PNFCs. Spreads on lending to small businesses were expected to tighten over the next three months, while for medium and large PNFCs they were expected to remain unchanged.

Defaults

  • The net percentage balance for changes in default rates on secured loans to households was unchanged in Q3, and is expected to decrease slightly in Q4. The net percentage balance for losses given default on secured loans were also unchanged in Q3, and were expected to remain unchanged in Q4.
  • The net percentage balance for changes in default rates for total unsecured lending increased in Q3. This was driven by an increase in defaults for both credit card and other loans (Chart 6). Lenders expected default rates for total unsecured lending to increase slightly in Q4.
  • The net percentage balance for changes in default rates on loans to corporates increased for small, medium and large businesses in Q3. These balances for defaults were expected to increase for businesses of all sizes in Q4. The net percentage balance for losses given default was unchanged for businesses of all sizes in Q3.

Chart 6 Default rates on unsecured lending to households(a)(b)

(a) See footnote (a) to Chart 1.
(b) Question: ‘How has the default rate on credit card/other unsecured loans to households changed?’.
(c) A positive balance indicates an increase in the default rate.

How to interpret this survey

This report presents the results of the 2019 Q3 survey. It was conducted between 2 and 20 September 2019. The results are based on lenders’ own responses to the survey. They do not necessarily reflect the Bank’s views on credit conditions. To calculate aggregate results, each lender is assigned a score based on their response. Lenders who report that credit conditions have changed ‘a lot’ are assigned twice the score of those who report that conditions have changed ‘a little’. These scores are then weighted by lenders’ market shares. The results are analysed by calculating ‘net percentage balances’. The net percentage balances are scaled to lie between ±100.

In this report, changes in balances are described as an ‘increase’ if greater than 10 in absolute terms, as ‘slight’ if between 5 and 10 and as ‘unchanged’ if less than 5.

Annexes

Next publication date: 16 January 2020.

Was this page useful?
Add your details...