Comments on Bank of England Credit Conditions Survey of Q1 2022

“Today’s figures reflect a situation we have seen developing for a few months now, and we are still a long way from the finish line. Significant portions of the UK population are falling into financial difficulty, with families at the lower end of the income scale being hardest hit. The pressures of the cost-of-living crisis are pushing up demand for credit, especially in the unsecured lending and credit card spaces, while the same inflationary pressures, along with rising interest rates, are quelling demand for discretionary borrowing.

“On the supply side, credit providers have continued to report an increase in the availability of credit to households for unsecured lending. However, our figures highlight that arrears and defaults in the consumer credit market are already climbing, and there’s a risk at times like this that lenders prioritise borrowers in a stronger financial position. We expect that to intensify in the next quarter as energy prices and National Insurance rises mean that higher costs of living ramp up the risk of loan defaults and heap downward pressure on household income. While lenders are right to be cautious, this crisis is different to the last one, and tools like Open Banking allow credit providers to lend with greater confidence to a wider pool of people.”

Paul Heywood, Chief Data and Analytics Officer at Equifax UK