Consumer Credit Demand Falls at Fastest Rate for Three Years

15. April 2018.
Marc Shoffman

LENDERS saw the biggest drop in demand for unsecured credit for three years during the first quarter of 2018.

The Bank of England’s first 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 15.2 per cent of lenders reported a decline in demand for loans and overdrafts during the first three months of 2018.

This was the biggest drop since 2015, when 17.3 per cent reported a decline.

Read more:Lenders underestimating consumer credit risk, Bank warns

Read more:FCA chief outlines consumer credit concerns

This was mainly due to a decline in demand for credit card lending, according to the lenders’ responses.

As demand fell, so did the availability of unsecured credit to households, with a net balance of 38.7 per cent of lenders reporting a decline.

“This was largely driven by a changing appetite to risk, with lenders also reporting that the credit scoring criteria for granting both credit card and other unsecured loan applications tightened significantly in the first quarter,” the Bank of England said.

“However, lenders expected the availability of unsecured credit to remain unchanged in the second quarter.”

Looking ahead, lenders anticipated an increase in demand for credit cards in the next three months but most predicted a drop in applications for loans.

There was also a greater expectation of loan defaults in the next quarter than there was in the previous quarter.

Read more: Consumer credit growth is on the rise again

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