Lenders report that secured credit to households rose “slightly” in the three months to the end of February, while demand for these loans also lifted, Bank of England data shows.
Institutions said household secured credit rose to a net balance of 18.4 in the period from 10.4 in the previous three months, citing expectations that house prices will rise.
Forecasts of their appetite for household secured credit over the coming three months jumped to a balance of 19.0 from 2.4 in the last quarter, according to the central bank’s latest Credit Conditions survey.
Lenders added that demand for this type of credit also jumped to a balance of 35.9 in the quarter to the end of February from a balance of minus- 31.6 in the previous three months.
Institutions expected demand for secured loans to rise to a balance of 23.2 from 21.9 in the previous quarter.
However, the appetite of lenders to make loans to borrowers with less than 10% of equity in their homes fell to a balance of 5.9 in the period from 15.9 in the previous quarter.
Although, institutions forecast their appetite for higher loan-to-value lending over the coming quarter lifted to a balance of 11.2 from 1.2 three months ago.
Lenders have cut interest rates in recent weeks, as uncertainty caused by rising global tariffs, has led to expectations that the Bank will cut interest rates three or four times, rather than twice, this year to shore up the UK’s fragile economy.
Broadstone senior risk director Paul Matthews says: “Despite uncertainty returning to the market in spades over the past few weeks, the Credit Conditions Survey suggests an expansion in both the availability and demand for household borrowing.
“It marks a hat-trick of economic good news for the government in the past seven days after inflation fell more than expected this week and the economy expanded faster than anticipated last week.
Matthews adds: “As rates fall, the loosening of credit conditions could boost economic activity by encouraging investment and consumption but it must be noted that the economy remains in a precarious situation.
“Household confidence will be key to taking advantage of this increasing supply of credit but remains shaky and could be de-railed should the ongoing global negotiations on trade tariffs results in further market turbulence.
“However, with default rates beginning to fall it suggests that there could be some light on the edge of the horizon.”
