Banks expect significant tightening in consumer lending in first quarter says Bank of England survey

British banks are planning to rein in their lending to consumers further over the first quarter as regulators’ efforts to raise lending standards start to bear fruit.

Lenders expect a “significant decrease” in the availability of unsecured credit – such as consumer loans and credit cards – in the first quarter of this year, according to the quarterly credit conditions survey published today by the Bank of England (BoE).

Banks tightened their lending for the fourth quarter in a row at the end of 2017, the survey found, albeit at a slightly slower rate than the third quarter.

Read more: Growth in consumer credit has fallen to its slowest since 2015

A balance of 24.3 per cent of banks said they expect unsecured lending to households to fall in the coming quarter, the fifth fall in a row.

The survey also found a “significant” fall in demand for unsecured credit, the first such fall in two years. John Cronin, head of UK banks research at stockbrokers Goodbody, said the fall in demand was “unsurprising given slowdown in consumer spending/increased nervousness”.

The BoE has previously expressed concerns about the build-up of lending in some sectors, noting last summer that there were “pockets of risk” growing. However, the BoE has prompted banks to up their lending standards in recent months.

Read more: Bank of England requires lenders to hold extra £11.4bn in capital

The appetite for increased risk among banks making unsecured loans fell steeply to a negative balance of 14.5 per cent, while more banks reported their criteria for offering unsecured credit have risen than at any point since the end of 2009.

Credit card loan approvals also fell steeply, with a third of banks saying they will reject more over the next three months – the most since the financial crisis.

The figures also showed a rush of demand for in secured lending, the vast majority of which are mortgages, as homeowners tried to remortgage ahead of November’s first interest rate rise in more than a decade.

Meanwhile, demand for mortgages for house purchases rose slightly in the fourth quarter.

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