LENDERS have reported a boom in demand for unsecured credit from households but have warned supply is dwindling due to tightening criteria.
The Bank of England’s third quarter credit conditions survey asked lenders about their opinion on credit conditions and assigned a value to their response, which was then weighted by their market share.
This was then calculated into a net percentage balance, which found that 36.4 per cent saw demand for unsecured credit increase in the three months to August, up from 4.4 per cent in its second quarter report.
The Bank said the increase in demand was solely driven by requests for credit card borrowing but lenders are expecting a fall in applications during the fourth quarter.
Looking at supply, 8.8 per cent reported a decline during the previous three months, with 10.7 per cent of lenders predicting a fall in the next three months.
More lenders noticed a fall in demand for loans from small businesses, with 16.4 per cent seeing a decline.
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Demand for business finance was expected to be flat in the next three months, while 0.9 per cent expected supply to fall.
It comes as the Bank’s Financial Policy Committee (FPC) said it is concerned about the growth in lending to risky UK businesses.
It also warned that these loans are being securitised in the financial markets, a practice that echoes some of the behaviour that led to 2008’s financial crisis.