MNI ANALYSIS: Widespread Tightening of Unsecured UK Credit

By David Robinson

     LONDON (MNI) - Lenders across the board have tightened up on the provision

of unsecured lending, resulting in a plunge in the credit availability balance

in the Bank of England's first quarter survey.

     While the BOE's Q1 Credit Conditions Survey (CCS), published Thursday,

showed secured household credit availability flat-lining, there was a dramatic

fall in the unsecured credit availability balance from -12.4 in Q4 to -38.7 in

Q1.

     That -38.7 outturn was the lowest in the data series, which stretches back

to Q2 2007. The previous low was -30.5 recorded in Q4 2008, in the depths of the

global financial crisis.

     These balances reflect the proportions of lenders tightening or loosening

credit availability, so they show dispersion rather magnitude of movements. The

plunge is compatible with very widespread decreases in unsecured credit

availability but these declines could modest in size.

     In its analysis the Bank said lenders responding to the Bank's (CCS)

"reported that the availability of unsecured credit fell significantly in 2018

Q1, driven by changing risk appetite and stricter credit scoring criteria.

Looking ahead, lenders expect this to remain unchanged."

     The Bank's financial stability wing has been pushing to ensure banks

maintain or improve underwriting standards on unsecured credit, and the

regulatory push seems to be bearing fruit.

     In a speech earlier Thursday, BOE Deputy Governor Ben Broadbent cited

internal research suggesting that the impact of policy changes on the financial

stability side on both growth and inflation are typically very slight.

     These Q1 data puncture media narratives about sharp increases in unsecured

borrowing against a backdrop of weak real earnings growth. Consumption is not

going to be credit fuelled if lenders are putting the screws on the credit

available.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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