The credit squeeze for UK households and businesses looks set to intensify over the coming months as lenders brace for rising defaults amid a deteriorating economic outlook, a survey by the Bank of England shows today.
The findings follow a raft of data in recent days suggesting the credit crunch is taking an increasingly heavy toll on Britain's economy.
The Bank's quarterly credit survey, conducted May 27 and June 18, showed lenders expect to further reduce mortgage lending to households and to tighten their credit criteria.
'Lenders reported that their expectations for the housing market, the changing economic outlook and changes in their appetite for risk had contributed to the decline in credit availability,' the survey noted.
'Lenders expected these factors to contribute to the tightening in credit availability over the next three months,' it added.
Default rates on secured lending to households rose by more than anticipated in the second quarter and lenders expected a further increase in the coming months. A pick-up in corporate defaults was also anticipated.
Lenders reported unexpectedly large falls in demand for credit for mergers and acquisitions activity and capital investment, and from the commercial property sector. 'These factors were expected to contribute to further weakening in demand for credit,' the survey noted.
