Latest figures in The Bank of England Credit Conditions Survey’ have found that demand for lending suffered a fall during the three months to the end of May. The survey suggests demand for loans is set to increase at a time when banks start to slow down lending and prepare for a wave of bad debts.
Lenders told the Bank of England that the availability of mortgages and unsecured debt is likely to decrease in the coming weeks, with concerns over borrowers’ ability to repay. The poll saw banks and building societies flag worries over customers who have opted for payment freezes on mortgages, credit cards and other loans, with lenders seemingly concerned that customers will have to restart payments in a period when jobs are increasingly at risk as the furlough scheme starts to wind down.
The demand for secured lending on purchases went down by 80%. Remortgaging levels plunged by more than 50% during Q2.
The availability of mortgages to households in the three months to the end of May also suffered a fall. The survey suggested the availability of secured credit would decrease further over the next three months to the end of August.
In the findings, Lenders were asked to report changes in the three months to end-May 2020 (Q2), relative to the period between December and February, and expected changes in the three months to end-August (Q3), relative to the period between March and May
- Lenders reported that the availability of secured credit to households in the three months to end-May 2020 (Q2) decreased.
- Lenders expected the availability of secured credit to decrease further over the next three months to end-August (Q3)
- Lenders reported that the availability of unsecured credit to households decreased in Q2, and was expected to decrease further in Q3. Lenders reported that demand for secured lending for both house purchase and remortgaging decreased in Q2, but was expected to increase in Q3.
- Lenders reported that the overall demand for unsecured lending decreased in Q2, comprising a decrease in both demand for credit card and other unsecured lending. Lenders expected the overall demand for unsecured lending to increase in Q3.
- Lenders reported that demand for corporate lending from businesses of all sizes increased in Q2, but was expected to decrease in Q3.
Meanwhile, Lenders reported that the availability of credit to the businesses increased for all business sizes in Q2. Total corporate credit availability was expected to increase only slightly in Q3. Several lenders noted that the schemes recently launched by the Government to support lending to businesses underpinned the reported increase in availability in Q2,