Default rates on both secured and unsecured loans to households and loans to both small and medium-sized businesses have increased in the first quarter of the year.
According to the latest Credit Conditions Survey from the Bank of England (BoE), the increase was slight for corporates in the latest quarter, but default rates in all these categories are expected to increase in the second quarter.
Default rates on loans to large businesses were unchanged in the first quarter and are expected to remain unchanged in the second quarter.
Losses given default remained unchanged for businesses of all sizes in the first quarter.
Read more: SMEs repay record £9.79bn in 2023
The latest BoE quarterly report presents results of a survey conducted between 26 February and 15 March 2024. The results are based on lenders’ responses to the survey.
Lenders reported that spreads on corporate lending to small businesses slightly widened, narrowed for medium-sized businesses, and were unchanged for large businesses in the first quarter.
Spreads on lending to businesses of all sizes were expected to be unchanged over the next three months.
Overall spreads on secured lending to households, relative to bank rate or the appropriate swap rate, were unchanged in the first quarter and were expected to remain unchanged in the second quarter. The same was true for unsecured lending to households.
Read more: SMEs repay record £9.79bn in 2023
In terms of supply, the overall availability of credit for small businesses increased, while availability for medium business was unchanged and availability for large businesses slightly increased in the first quarter. Overall availability was expected to slightly increase further in the next three months.
The availability of secured credit to households increased in the three months to the end of February 2024 and is expected to increase over the next three months to the end of May 2024.
However, the availability of unsecured credit to households was unchanged in the latest quarter and is expected to remain unchanged in the coming three months.
Demand for corporate lending from small businesses was unchanged, while demand from medium-sized businesses and large firms slightly increased in the first quarter. Demand is expected to be unchanged for small, medium, and large-sized businesses in the second quarter.
For secured and unsecured lending, demand increased in the first quarter, and both are expected to increase in the second.
