Banks plan clampdown on credit after warnings on debt mountain

Credit cards are harder to come by as banks tighten up their lending criteria under pressure from the Bank of England
Credit
Philippe Wojazer  REUTERS

The latest figures suggested that lenders were heeding warnings from the Bank about spiralling household debt.

Demand for both credit card and other unsecured lending products was reported to be unchanged in third quarter, and was expected to be unchanged again in the fourth quarter.

The survey showed the net balance of lenders' expectations for the availability of unsecured lending to households over the next three months fell to -28.6 from -16.2, indicating the sharpest fall since the fourth quarter of 2008, when the United Kingdom economy contracted by 2.2%.

The Bank earlier this year warned against a "spiral of complacency" by lenders.

The growth rate is down since late 2016, but it is still close to the rate last seen before the 2008 financial crisis.

She said: "We're quite concerned about the consumer squeeze".

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said it came as the worst phase of the squeeze on real wages was almost over with inflation around its peak.

Household spending has played a key role in supporting the overall economy in the wake of the 2016 Brexit vote, and with real incomes suppressed by rising inflation consumer credit has been an important prop to consumption.

Banks became less willing to lend to those with smaller deposits, though mortgage lenders expect this to change in the coming three months as they increase lending once more to that end of the market.

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