Banks are being less fussy about who they lend to as they try to tempt customers into taking on big personal loans, the Bank of England said on Friday.
Consumers splashing out on big-ticket items – mainly cars – have been driving the demand for loans, while “credit-scoring criteria for such lending was reported to have loosened” in the final quarter of last year, according to the Bank’s latest snapshot of credit conditions.
The cost of loans is close to record lows, which “lenders attributed to their changing appetite for risk”. Rates on credit cards are unchanged, but lenders are competing in other areas, such as extending interest-free periods on balance transfers, the Bank said.
Shoppers are more willing to take on debt and to dig into savings to fuel spending, but the survey may fuel Bank worries over their vulnerability to interest rate rises.
The UK’s builders, meanwhile, disappointed as November output declined by 0.5 per cent and the industry marked its biggest annual decrease in output since May 2013.
Howard Archer at IHS Global Insight called the fall “another blow to hopes that UK growth picked up in the fourth quarter”.Reuse content