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Banks plan clampdown on credit after warnings on debt mountain Banks plan clampdown on credit after warnings on debt mountain
(about 1 hour later)
UK banks are planning the biggest squeeze in consumer credit since late 2008, when the economy was in the depths of recession, according to a Bank of England survey. British banks are planning the biggest squeeze on consumer credit since late 2008, when the economy was in the depths of recession, according to a Bank of England survey.
The clampdown follows warnings that Britain’s debt mountain has risen to dangerous levels. The clampdown follows warnings that Britain’s debt mountain has risen to dangerous levels as households struggle with rising shop prices and low wage growth.
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 UK economy contracted by 2.2%. The survey showed the net balance of lenders’ expectations for the availability of unsecured lending to households over the next three months fell from -16.2 to -28.6, indicating the sharpest drop since the fourth quarter of 2008, when the UK economy contracted by 2.2%.
Demand for secured lending for house purchase fell slightly in the third quarter and was expected to be unchanged in the final three months of the year. Demand for secured lending for house purchases fell slightly in the third quarter and was expected to be unchanged in the final three months of the year.
Lenders made it more difficult for consumers to take out new credit cards and unsecured loans such as overdrafts in the third quarter, tightening lending criteria and approving fewer applications.
“Some lenders reported that they had slightly tightened their credit criteria for some products,” the Bank reported. “Motivations for this included concerns about customer indebtedness and the squeeze in real incomes.”
Last month, the chief financial regulator urged the government to step in to help tackle the mountain of debt being racked up by the most vulnerable consumers in Britain.
Andrew Bailey, the chief executive of the Financial Conduct Authority, told the Guardian he was concerned about the number of people who needed loans to make ends meet.
Lenders taking part in the Bank’s latest credit conditions survey reported a slight increase in credit card defaults in the third quarter and a “significant” rise in the number of defaults on other unsecured lending, which includes overdrafts and personal loans.
A growing reluctance among banks to lend to extend consumer credit comes as markets and economists bring forward their expectations for the timing of the first rise in interest rates in more than a decade.
Policymakers at Threadneeedle Street are widely expected to increase rates from their all-time low of 0.25% to 0.5% when they announce their decision on 2 November.
The last time the Bank raised rates was July 2007, before the financial crisis took hold.
Banks said they expected the availability of loans to businesses to remain roughly unchanged over the next three months.Banks said they expected the availability of loans to businesses to remain roughly unchanged over the next three months.
However, lenders expected demand for loans for capital investment in businesses to fall at the fastest rate since the third quarter of 2011. However, lenders expect demand for loans for capital investment in businesses to fall at the fastest rate since the third quarter of 2011.