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Summary 

Default rates on secured and unsecured loans to households and loans to small and medium-sized corporates have increased during the first quarter of the year.

The latest Credit Conditions Survey from the Bank of England found that default rates in these categories are expected to increase further during the second quarter. Meanwhile, default rates on loans to larger businesses were unchanged in Q1 and expected to remain unchanged in Q2.

The findings reflect lenders’ responses to a survey conducted between 27 February and 17 March 2023. The survey also found that, for secured lending to households, overall spreads relative to the bank rate (or appropriate swap rate) narrowed in Q1, and are expected to narrow further in Q2. The same applied to unsecured lending to households.

Spreads on corporate lending to small businesses were unchanged, but narrowed only slightly for medium-sized businesses, and widened for large businesses.

Demand for lending across the board was also down in Q1 but expected to increase slightly for households in Q2.

In terms of supply, lenders reported that the availability of secured credit to households was unchanged in the three months to the end of February 2023 and expected to decrease over the next three months.

The availability of unsecured credit to households decreased over the same period but was expected to increase slightly in Q2. The overall availability of credit to the corporate sector was unchanged in Q1 for businesses of all sizes and expected to remain so during Q2.

Links: https://p2pfinancenews.co.uk/2023/04/13/lenders-report-increase-in-default-rates-in-q1/