UK lenders cut credit availability to households and smaller firms in Q3 while card defaults rose

Serguey Asael Shinder12 October 2026, 08:282 min read

The Bank of England published its Credit Conditions Survey for 2026 Q3 on 8 October. Lenders reported on the three months to the end of August, compared with March to May, and gave expectations for the three months to the end of November. The survey ran from 17 August to 4 September, so it does not capture anything that happened later.

How to read it. Results are net percentage balances weighted by lenders' market shares. The Bank calls a balance above 10 an "increase", below −10 a "decrease", between 5 and 10 a "slight" move, and anything under 5 in absolute terms "unchanged". The answers are the lenders' own and do not necessarily reflect the Bank's view.

Households.

• Availability of secured credit (mainly mortgages) decreased in Q3; lenders expect a slight increase in Q4.
• Availability of unsecured credit decreased in Q3, again with a slight increase expected.
• Demand for mortgages for house purchase decreased, as did demand for remortgaging; both are expected to pick up in Q4.
• Spreads on secured lending narrowed — relative to Bank Rate or swap rates — and are expected to narrow further.
• Defaults on unsecured lending increased, including on credit cards, and are expected to keep rising for cards. Defaults on secured loans decreased slightly.

Companies. Overall corporate credit availability was unchanged, but by size it decreased for small and medium-sized businesses and was unchanged for large ones. Demand for credit from smaller firms also decreased, and is expected to fall slightly again in Q4. Corporate spreads and default rates were unchanged across all sizes; lenders expect spreads for large firms to narrow.

What stands out. Two lines move in opposite directions. Lenders report mortgage credit at narrower spreads and, at the same time, less availability; the survey records both without linking them. And the stress shows up in unsecured borrowing, where defaults are rising and expected to keep rising for cards, not in mortgages. For smaller companies, falling availability coincides with falling demand, so the survey alone cannot say which is leading.

Next. The Q4 survey is due on 14 January 2027.

Source: Bank of England, Credit Conditions Survey 2026 Q3, 8 October 2026 — https://www.bankofengland.co.uk/credit-conditions-survey/2026/2026-q3