UK lenders see sharp tightening of consumer credit in coming months

UK consumer credit growth is slowing and lenders expect the biggest decline in consumer credit availability since the financial crisis in the last three months of the year, a Bank of England survey revealed on Thursday.

The Bank's quarterly credit conditions survey found lenders reined in the availability of unsecured credit in August and, looking to the fourth quarter of 2017, the net balance of lenders’ expect the availability of unsecured lending to households to worsen fell to -28.6 from -16.2, the sharpest fall since the end of 2008.

While the consumer credit market remains swollen compared to recent years, annual growth eased below 10% in July and August for the first time since spring last year, falling to 9/8% in July and August, the Bank said.

"Although competition and growth in this market remain strong, there are tentative signs of a slight tightening in lending criteria, with lenders expecting further tightening in Q4," the Bank said.

The Bank of England's Financial Policy Committee last month called for banks to increase the amount of capital buffers they hold as it warned there was a "pocket of risk" in consumer credit.

Mortgage lending remained stable amid stiff competition in the low-rate environment, with an annual growth rate of 3.2% in August and lenders reporting demand was little changed during the second and third quarters.

Corporate demand for capital investment lending over the next three months was expected to be the lowest since 2011, the survey also found.

The Bank said there were "tentative signs that credit conditions may have tightened at the margin — in particular to smaller companies and in certain industries", noting that lending to small and medium-sized enterprises (SMEs) has slowed
gradually since mid-2016.