UK lenders intend to increase the credit availability to corporate and households in the coming three months, a survey conducted by the Bank of England revealed Thursday.
The latest Credit Conditions Survey said lenders reported slight increase in corporate credit availability in the last quarter, in contrast to a small drop expected in the fourth quarter. Lenders anticipate further increase over the coming three months.
The first-quarter Credit Conditions Survey was conducted between February 23 and March 13. The survey covered secured and unsecured lending to households and small businesses, and lending to non-financial corporations and to non-bank financial firms.
Lenders reduced the availability of secured credit to households during three months to mid-March and a small net balance of lenders expects an increase in overall credit availability in the coming quarter. Reduced risk appetite and expectations for house prices were the major reasons behind this tightening.
At the same time, unsecured credit availability to households and small businesses reduced less than expected. Over the coming quarter, lenders forecast unsecured credit availability to remain broadly unchanged.
The Bank of England said, The economic outlook was no longer expected to be a factor bearing down on credit availability. Improvements in the cost and availability of funds were expected to support increased credit availability over the next three months.
With respect to demand, lenders said demand for secured lending for house purchases and for remortgaging decreased in the last quarter and expect demand to fall further.
Demand for credit by private non-financial corporations also declined over the past three months. Lenders see a further decrease in demand from medium sized companies, but expect large firms to increase.
The survey found that default rates, and losses given default, on secured and unsecured lending to households and lending to private non-financial corporations climbed over the past three months. Lenders predict a further increase in both default rates and losses given default.
The interest rate in the UK reached a historical low of 0.5%. The central bank also started to buy assets using central bank reserves in March.
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