Lenders to crack down on credit card debt

The Bank of England's Credit Conditions Survey found lenders expect to impose stricter credit scoring criteria for people trying to take out credit cards in the coming months
Gareth McKeown

Households could find it harder to take on more credit card debt in the coming months as banks and building societies plan to impose stricter borrowing criteria.

The Bank of England's Credit Conditions Survey found lenders expect to impose stricter credit scoring criteria for people trying to take out plastic in the coming months, although mortgage availability is predicted to increase.

Lenders reported that the availability of non-mortgage credit decreased slightly in the first quarter of this year and was expected to decrease further in the second quarter.

The report said that in the second quarter of 2017 lenders "expected credit scoring criteria on credit card lending to tighten significantly".

But lenders do expect to make further increases to interest-free periods on credit card offers in the second quarter of 2017.

Debt help charities have raised concerns in recent months over figures showing strong growth in consumer credit.

They have warned that some households may find themselves in financial difficulty if their borrowing becomes overstretched.

Demand for credit card borrowing is expected to increase slightly in the second quarter of 2017, the survey found, while demand for other non-mortgage loans is expected to dip slightly.

Howard Archer, an economist at IHS Markit, said the Bank of England had "clearly become more worried about consumer borrowing and debt levels in recent months".

He said: "If the fundamentals for consumers do weaken further as expected over the coming months, it is vital that banks adopt tight lending standards in granting unsecured (non-mortgage) consumer credit, or it risks causing serious debt problems for the economy."

While mortgage availability is expected to have increased by mid-June, lenders also reported they had become less willing to lend to borrowers with less than 10% of equity in their home.

Lenders also said they saw a significant drop-off in demand for buy-to-let mortgage borrowing in the previous three months.

Buy-to-let investors have been hit by various tax changes, including a stamp duty hike last year.

Overall, mortgage demand from home buyers is expected to increase in the next few months, driven by an increase in prime lending.

Demand for remortgage loans is also predicted to pick up this spring, according to the survey findings.

Lenders also reported that lower investment had been exerting a "significant drag" on demand for business borrowing in the previous three months, although increased merger and acquisition activity had pushed up on demand.

The Bank conducts its quarterly survey of lenders as part of its role to maintain financial stability.

The latest survey took place between February 20 and March 10.

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