Lenders have reported that the availability of secured credit to households increased in the three months to the end of November 2021, according to the latest Credit Conditions Survey by the Bank of England (BoE).

According to the Bank’s findings, lenders are expected the availability of secured credit to increase over the next three months, up to the end of February 2022.

In terms of demand for secured lending for house purchase, lenders also reported a decrease in Q4, with a further decrease expected in the first quarter of this year. Respondents to the survey reported that demand for secured lending for remortgaging increased in Q4, and was expected to decrease slightly in Q1.

Lenders also reported that overall spreads on secured lending to households – relative to the BoE’s rate or the appropriate swap rate – narrowed in Q4, and were expected to be unchanged in Q1.

Commenting, Hargreaves Lansdown senior personal finance analyst, Sarah Coles, said: “Demand for mortgages has dropped, and is set to keep falling, so banks don’t need as much cash to fund this lending. Meanwhile, the news isn’t any better for borrowers, because the squeeze on household incomes means more people turning to credit cards and loans, and more struggling to make repayments.

“Demand for loans and credit cards rose at the end of the year, and is set to continue doing so as we go into 2022. With inflation running at 5.1%, and the price of petrol and energy causing real pain for households, more of us have been borrowing to make ends meet, and the banks expect us to keep borrowing even more.

“In the short-term, this may not cause any problems, because the banks are increasingly happy to lend. The trouble comes further down the line, when prices have gone up even more, and you’re struggling to stretch your budget to cover interest payments on top of your rising bills.”

Elsewhere, the BoE’s analysis suggested that the net percentage balance for changes in default rates on secured loans to households had fallen in Q4, but was expected to increase at the start of this year.

“Already the banks say that default rates on both mortgages and unsecured lending have started to rise, and they expect them to increase further in the first three months of the year,” Coles added.

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