The BoE released its “Credit Conditions” and “Bank Liabilities” surveys for the fourth quarter of 2018. Lenders reported that the availability of secured credit to households had decreased, although it is expected to increase this quarter. The availability of unsecured credit to households has also decreased, and this is expected to continue in the first quarter. Credit scoring criteria for total unsecured loan applications have also tightened.

Household unsecured credit availability - Source BoE

The overall availability of credit to the corporate sector was unchanged, with one notable exception. Credit provided to medium businesses was reported to have fallen slightly in Q4, but was unchanged for small and large businesses. Overall demand for unsecured lending increased significantly again in Q4. The BoE said this was solely driven by a significant increase in demand for credit card lending.

Lenders also reported a decrease in demand for corporate lending from small businesses in Q4, and expected demand to decrease slightly in Q1. For medium Private Non-Financial Corporations (PNFCs), demand for lending was slightly up but is expected to fall in the next quarter.

Corporate demand for lending by firm size - Source BoE
 
In addition, UK banks reported that default rates increased for total unsecured lending in Q4. This was driven by an increase in default rates on credit card loans. Lenders also reported that default rates on loans to corporates increased for small businesses in Q4, and increased slightly for medium-sized businesses.

This comes a few weeks after European regulators’ toughest test yet of how resilient banks are to shocks showed that English banks were among the worst performers, especially Barclays and Lloyds. This further underscored the vulnerability of UK lenders to weak growth, credit losses and Brexit.