LONDON: British banks are set to reduce their unsecured lending in the third quarter, the latest Credit Conditions Survey from the Bank of England showed Thursday. Lenders said the availability of secured and unsecured credit to households will decrease over the next three months to mid-September.
An expected slight decrease in availability of secured credit to households reflects a changing appetite for risk, the bank said. In the second quarter, the availability of secured credit to households increased, while that for unsecured credit decreased from the prior period. The Bank of England had toughened its stance on credit card, personal loan and car finance provided by lenders. The Prudential Regulation Authority last week said that the resilience of consumer credit portfolios is reducing, due to the combination of continued growth, lower pricing, falling average risk-weights and some increased lending into higher-risk segments. While demand for credit card lending increased slightly in the second quarter, it was expected to be unchanged in the third quarter, survey showed today. On lending to businesses, the survey revealed that the availability of credit to the corporate sector will remain unchanged again in third quarter.
Demand for corporate lending from both small and medium-sized businesses increased significantly in the second quarter, the first increase reported for either since the second quarter of 2016. Demand from small-sized businesses was expected to fall back in third quarter, while no change was anticipated for medium-sized businesses. Meanwhile, demand from large companies decreased notably. It is expected to fall further in the third quarter. Lenders reported that default rates on secured loans to households fell significantly in the second quarter, and expected these to fall slightly further in third quarter. Default rates on both credit card and other unsecured lending to households were reported to have increased significantly in the second quarter, and were expected to increase further on credit card lending in third quarter. Lenders expected an increase in the default rate on loans to firms of all sizes in third quarter.
