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Unsecured debt borrowing drops “significantly" in Q1

The overall supply and demand for unsecured credit has dropped significantly in the first quarter of 2018, according to the Bank of England’s (BoE) credit conditions survey.

The BoE’s quarterly survey of banks and building societies is aimed at improving its understanding of trends and developments in credit conditions.


The survey found that the availability of unsecured credit to households decreased significantly in quarter one, which the BoE said was largely driven by a changing appetite for risk by lenders.


It also said that lenders have reported the credit scoring criteria for granting both credit card and other unsecured loan applications tightened in this quarter.


The bank said lenders expect the availability of unsecured credit to remain unchanged in quarter two of this year.


The demand for unsecured lending was also reported to have decreased - with a notable decrease in demand for credit card lending, but an increase in demand for other unsecured lending.


The BoE said lenders expect this to reverse in the next quarter, anticipating an increase in credit card lending alongside a decrease in other unsecured lending.


It also said that default rates for unsecured loans have increased, with a further slight increase expected in the second quarter of 2018.


The demand for secured lending, for house purchase, was also reported to have decreased significantly in quarter one. The BoE said this was driven by a fall in demand for both prime and buy-to-let lending, but lenders expect a marked pick up in demand in quarter two this year.


The survey found that household demand for secured lending for remortgaging also decreased in quarter one, but lenders expect demand to pick up again markedly in quarter two.



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