The Bank of England's quarterly Credit Conditions Survey shows that lenders expect to tighten the availability of credit to households and businesses over the coming months, reflecting concerns about the economic outlook and the increasing pressure on household budgets from elevated interest rates and living costs.
The survey, which collects the views of the major UK lenders on the availability of and demand for credit, found that lenders had tightened credit conditions for both households and businesses during the second quarter and expected to tighten them further in the third quarter. The tightening was most pronounced for unsecured consumer credit — credit cards and personal loans — where lenders reported that they were becoming more cautious about the creditworthiness of borrowers.
The survey also found that demand for credit had weakened. Household demand for mortgages fell for the fourth consecutive quarter, reflecting the effect of higher interest rates on affordability. Business demand for credit also fell, with firms reporting that they were delaying investment and reducing their reliance on borrowing in an uncertain economic environment.
The survey is an important input into the Bank's assessment of financial conditions and the transmission of monetary policy. The finding that credit conditions are tightening and demand is weakening is consistent with the Bank's expectation that higher interest rates will slow the economy and reduce inflationary pressure. But the Bank has also cautioned that an excessive tightening of credit could amplify the economic slowdown and create risks to financial stability.
Join in — free. Comments on Daily Junction are for members, so real names stay rare and bots stay out.
One field. We email you a 6-digit code — no password needed. Your comment is kept while you do it.
Under 13? You’ll need a parent’s OK first — it takes them one click.