Following the release of the Bank of England Credit Conditions Survey today, Paul Heywood, Chief Data and Analytics Officer at Equifax UK, said: “Demand for credit was expected to balloon in the final quarter of 2021, as government support measures tailed off, and rising inflation increased costs for consumers and businesses alike. With a few exceptions, that’s exactly what lenders have seen, especially in the unsecured lending space, where a cost-of-living crisis and the end of furlough collided with a festive period that saw retail sales rise by 2.1%. The Bank of England was also blowing hot and cold over a potential base rate rise at the back end of last year, which has led to continued demand from homeowners looking to remortgage, but the greatest uptick actually came from new property purchases, suggesting that the end of the Stamp Duty holiday has done little to quell activity in the housing market.
“Over on the supply side, credit providers report being eager to lend to households, and have been increasing the availability of credit in recent months, but as the latest wave of COVID tears across the UK, there are symptoms of a looming affordability crisis. Loan defaults are set to rise, as are the number of people falling into arrears, and this should be a reminder for lenders that affordability assessments are now more important than ever.”