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U.K. Lenders Make It Harder to Borrow Money After BOE Warnings

  • Banks tighten credit-scoring criteria for unsecured loans
  • Bank of England is concerned about rampant consumer borrowing

Britain’s major banks are making it tougher for consumers to get unsecured credit, which may slow the pace of lending that the Bank of England has identified as a risk to financial stability.

In its Credit Conditions survey, the BOE said its measure of the availability of unsecured credit fell to minus 6.6 in the first quarter, to first time it dropped below zero since 2012. The measure for the next three months declined to a level that would represent the tightest availability since just after the collapse of Lehman Brothers in 2008.

Lenders in the BOE survey -- including Barclays Plc, HSBC Holdings Plc and Royal Bank of Scotland Group Plc -- said the decrease was mainly driven by tighter credit-scoring criteria.

The central bank has identified consumer credit growth as a financial-stability risk, with an annual expansion rate of more than 10 percent in recent months. In its analysis last month, the BOE highlighted interest-free periods on credit-card balance transfers and an increase in maximum loan limits in some parts of the unsecured personal loan market, and said it plans to review underwriting standards.

The Credit Conditions survey on Thursday said there’s “intense” competition in the credit card market and that the length of interest‑free balance transfers currently on offer is at its highest point since the series began in 2004.

The survey also noted that demand for credit-card lending and total unsecured borrowing fell in the first quarter, though is expected to pick up again.

— With assistance by Mark Evans, and Lucy Meakin

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