Drawing on the results of its Bank Liabilities Survey and Credit Conditions Survey, the Bank of England has published its Credit Conditions Review 2015 Q4. This comments on the latest developments in bank funding and household and corporate transactions for the last quarter. Q4 highlights in the Consumer Credit sector include:

Secured lending to UK households

  • Mortgage approvals for house purchase remained around 70,000 per month but secured lending continued to pick up.
  • Growth in stock reached 3.5% on a 3 month annualised basis in November, with annual growth at 2.5% (the highest growth rates have been since 2008 and 2009).
  • Gross secured lending was lower than the average pre-crisis.
  • Uncertainty surrounding the outlook for the Buy-To-Let (BTL) sector stemming from factors such as stamp duty. 2016 BTL activity is expected to be broadly flat.
  • A pickup in secured lending due to the increased availability of secured credit on the market.
  • An increase in demand for BTL lending as well as an increase in demand for remortgaging.

Consumer Credit

  • Annual rate of growth in the stock of consumer credit (excluding student loans) picked up to 8.3% in November, with personal loans and overdrafts accounting for the majority of overall net flow (mostly for car finance).
  • Rates on personal loans remain close to historically low levels despite having increased slightly in the quarter.
  • Credit card rates remain largely unchanged but competition remains centred on the interest free period on balance transfers.
  • Availability of unsecured credit (primarily personal loans and overdrafts) increased.

Loan Performance

  • Mortgage arrears and possessions rates were lower in Q3 relative to Q2, with write-offs remaining very low.
  • Consumer credit write-offs were down in the year, remaining at historically low levels.
  • Rate of personal insolvency remained broadly flat.