The UK’s supply of credit is expected to shrink as businesses default on loans.
Rising interest rates and the worsening economic outlook began to affect the demand for credit and its availability even before the turmoil unleashed in the markets by the government’s mini-Budget at the end of September, according to research by the Bank of England.
The survey of lenders, conducted between 30 August and 16 September, found that expectations for the availability of credit over the next three months fell to a balance of -40.9%.
Arrears are also beginning to rise as households struggle to make ends meet amid inflation at nearly 10%. The net balance for the default rate rose from -7.6% to 7% and is expected to increase further.
Expectations for the availability of credit for commercial property were at their lowest since summer 2020. The outlook will have since worsened, given the surge in gilt yields following the mini-Budget.
