The Bank of England has published its latest Credit Conditions Survey for the first quarter of 2022.
Lenders reported that the availability of secured credit to households was unchanged in the three months to end-February 2022 (Q1). Lenders expected the availability of secured credit to decrease over the next three months to end-May 2022 (Q2).
The availability of unsecured credit to households increased in Q1 and was expected to increase in Q2, lenders said.
In addition, lenders reported that the overall availability of credit to the corporate sector was unchanged in Q1, remaining unchanged for businesses of all sizes. Overall availability was expected to remain unchanged in Q2.
On the demand side, lenders reported that demand for secured lending for house purchase slightly increased in Q1, and was expected to increase in Q2. Demand for secured lending for remortgaging increased in Q1, and was expected to increase in Q2.
Overall demand for unsecured lending increased in Q1, and was expected to increase in Q2. Within the overall figure, demand for both credit card lending and other unsecured lending increased in Q1, and were expected to increase in Q2.
In addition, lenders reported that overall demand for corporate lending from businesses of all sizes was unchanged in Q1 and was expected to increase in Q2.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Although usually a useful indicator of direction of travel for the property market, these figures are probably not particularly helpful.
“The increase in house purchase demand reflects buying intentions from before the rising cost of living began to take effect. At the sharp end, we have noticed some lenders are already building in a more cautious approach to their decision making, which is inevitably compromising confidence among buyers.
“There is still plenty of demand whereas supply, while increasing, is not keeping up fast enough, which will continue to support prices going forward.”
Paul Heywood, chief data and analytics officer at Equifax UK, added: “Today’s figures reflect a situation we have seen developing for a few months now, and we are still a long way from the finish line. Significant portions of the UK population are falling into financial difficulty, with families at the lower end of the income scale being hardest hit.
“The pressures of the cost-of-living crisis are pushing up demand for credit, especially in the unsecured lending and credit card spaces, while the same inflationary pressures, along with rising interest rates, are quelling demand for discretionary borrowing.
“On the supply side, credit providers have continued to report an increase in the availability of credit to households for unsecured lending. However, our figures highlight that arrears and defaults in the consumer credit market are already climbing, and there’s a risk at times like this that lenders prioritise borrowers in a stronger financial position.
“We expect that to intensify in the next quarter as energy prices and National Insurance rises mean that higher costs of living ramp up the risk of loan defaults and heap downward pressure on household income. While lenders are right to be cautious, this crisis is different to the last one, and tools like Open Banking allow credit providers to lend with greater confidence to a wider pool of people.”