The Bank of England’s 2013 third-quarter credit conditions survey of lenders was conducted in August and September and, whilst not necessarily reflecting the Bank’s own views on credit conditions, serves to give a general picture of the UK credit conditions during the period, according to the views of lenders.

Regarding money supply:

  • The availability of secured credit to households was reported to have increased significantly in the three months to early September 2013. Lenders expected little change in availability over the next three months.
  • Lenders reported that the availability of unsecured credit to households increased in the third quarter, with a further increase anticipated to the end of 2013.
  • The overall availability of credit to the corporate sector increased slightly in the third quarter according to lenders, with them collectively expecting a further slight increase during the final quarter of 2013.

The Demand:

  • Demand for secured lending for house purchase was reported to have increased significantly in the third quarter, and was expected to increase slightly further in the final quarter of 2013. Lenders also reported a significant increase in demand for secured lending for re-mortgaging in the third quarter.
  • Lenders reported that demand for credit card lending was unchanged in the third quarter, and they expected little change in the fourth quarter. Demand for other unsecured lending products, such as personal loans, increased significantly in the same period, although a slight fall in demand was expected to the year end.
  • Demand for lending from small and medium-sized businesses was reported to have picked up in the third quarter, while demand from large companies was little changed. Lenders expected credit demand to increase across all business sizes in the remaining quarter of 2013.

Regarding Defaults:

  • Lenders reported that both default rates and losses given default on secured loans to households fell significantly in the third quarter of 2013. Defaults were expected to fall further, and losses given default were expected to fall significantly further.
  • Default rates on unsecured lending fell in the third quarter, with significant falls reported for credit card loans and slight falls for other unsecured loans.
  • Default rates on lending to small and medium-sized businesses were reported to have been little changed in the third quarter, while losses given default for these businesses decreased. The default rate for large businesses increased slightly in the third quarter, while losses given default for large businesses were little changed.

In Loan Pricing:

  • Lenders reported that overall spreads on secured lending to households— relative to Bank Rate or the appropriate swap rate — narrowed significantly for the fourth consecutive quarter. Spreads were expected to fall significantly further in the last quarter of 2013.
  • Spreads on credit card lending were reported to have increased slightly in the third quarter, having been little changed for most of the last two years. In contrast, spreads on other unsecured lending products fell significantly at the same time, and a further significant fall was anticipated to the end of 2013.
  • Spreads on corporate lending also fell, with significant reductions reported for large businesses. Medium-sized businesses also saw a significant fall in spreads, and slight falls were reported for small businesses. In the fourth quarter, spreads were expected to fall further for large and medium-sized companies, and to be little changed for small businesses.

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