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Lenders ‘rein in availability of non-mortgage credit to households’

Lenders reined in the availability of non-mortgage credit to households in the first quarter of 2018, a survey of banks and building societies has found.

The Bank of England’s Credit Conditions Survey said lenders reported that the availability of unsecured credit to households fell significantly in January to March.

The decrease was “largely driven by a changing appetite to risk”, the report said.

The length of interest-free periods for balance transfers on new credit card lending also decreased significantly in the first quarter of this year, the survey found.

And lenders reported that credit-scoring criteria for granting both credit card and other loan applications tightened during the period.

The availability of unsecured credit is expected to remain unchanged over the next three months, the report said.

The Credit Conditions Survey asks banks and building societies about the past three months and the next three months as part of the Bank’s role in maintaining financial stability.

The latest survey took place between February 19 and March 9.

The report also said mortgage availability to households was unchanged over the previous three months, with no further change expected in the coming three months.

Demand for mortgages from home-buyers was reported by lenders to have fallen significantly in the first quarter, driven by a decrease in borrowers’ appetites for prime and buy-to-let lending. Demand for re-mortgaging also fell.

But lenders expect to see a marked pick-up in demand for mortgages between now and June.

Meanwhile, the overall availability of credit to firms was reported to be unchanged in the first quarter, with no change expected in the next three months.

There was no change in demand for credit from businesses in the first quarter but, looking ahead, lenders expect a pick-up in demand from medium-sized businesses alongside a slight increase in demand from larger firms.

Demand for credit from small businesses is expected to remain unchanged over the next quarter.

Howard Archer, chief economic adviser at EY Item Club, said the Bank of England has “warned that banks risk becoming complacent in their lending behaviour so it should take some comfort from banks reportedly tightening their lending standards for granting unsecured consumer credit”.