Is the UK entering a new phase of financial stability?
The Bank of England’s latest Credit Conditions Survey has revealed an improvement in the lending landscape for UK households, with both the availability and demand for secured and unsecured credit increasing in the first quarter of 2025.
Covering the three-month period to the end of February, the quarterly survey found that lenders reported a rise in the availability of credit for households. This trend is expected to continue through the second quarter, ending in May. The appetite for borrowing also increased during the same period, reflecting a potential resurgence in household financial confidence.
The report also provided encouraging news on borrower reliability. Default rates on secured loans remained steady in the first quarter and are anticipated to remain unchanged into the next. For unsecured credit, such as personal loans and credit cards, default rates decreased and are also expected to hold at current levels through May.
Paul Matthews, senior director of risk at Broadstone, an independent financial services consultancy, said the survey’s findings indicate a broader trend of economic recovery.
“Despite uncertainty returning to the market in spades over the past few weeks, the Credit Conditions Survey suggests an expansion in both the availability and demand for household borrowing,” Matthews said. “It marks a hat-trick of economic good news for the Government in the past seven days after inflation fell more than expected this week and the economy expanded faster than anticipated last week.”
He added that lower interest rates and loosening credit conditions may help stimulate economic activity, but also warned of ongoing risks.
“Household confidence will be key to taking advantage of this increasing supply of credit but remains shaky and could be de-railed should the ongoing global negotiations on trade tariffs result in further market turbulence,” Matthews said.
“However, with default rates beginning to fall it suggests that there could be some light on the edge of the horizon. Lenders should ensure they continue to offer options that suit the long-term financial interests of all their customers and stand ready to protect borrowers should matters take a turn for the worse.”
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