Lenders plan to scale back unsecured credit significantly

LENDERS expect to provide significantly less unsecured consumer credit in the first quarter of 2018, according to the Bank of England’s latest credit conditions survey.

Unsecured lending to households fell again in the fourth quarter, meaning reductions were reported in all four quarters of 2017.

Credit scoring criteria tightened and lenders said they expect to tighten their criteria significantly further in the first quarter.

It comes after figures published at the start of January revealed the annual growth rate of consumer lending slowed to 9.1 per cent in November – the lowest rate since December 2015.

The Bank of England has previously expressed concerns about the rise in personal debt in the UK.

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The credit conditions survey also reveals demand for corporate lending from small- and medium-sized  businesses was unchanged in the fourth quarter, while spreads widened and default rates increased slightly.

Graham Toy, chief executive of the National Association of Commercial Finance Brokers, said demand for finance among small businesses appears to be in the doldrums, but the last quarter of the year is typically slower for funding applications.

“While the Bank of England’s survey doesn’t paint the rosiest of pictures, it has to be remembered that this is a snapshot of lending amongst banks and building societies,” he said. “As our members continue to report, alternative routes to finance are still seeing a healthy level of demand.”

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