UK lenders are planning to rein back on consumer lending over the next three months amid fears of an economic downturn following the consumer credit explosion.
The latest quarterly credit survey from the Bank of England has revealed that 18.8 per cent of British lenders expect to tighten their loan criteria to reduce the availability of consumer credit over the next quarter.
This figure represents a huge rise from the last Bank of England survey in January, when just 7.9 per cent of lenders planned similar credit tightening measures.
The general economic outlook has been reported by lenders surveyed as the main reason for this action.
The new figure mark the largest proportion of lenders tightening consumer lending since the financial crisis at the end of 2008, when it was deemed that extreme measures were required.
The boom in consumer credit over the past year has been seen as helping sustain and fuel economic growth following the Brexit decision in the EU referendum last June.
The Bank of England Financial Policy Committee has already voiced concern about the rise in household debt, and confirmed that the Prudential Regulation Authority (PRA) is currently reviewing lending standards for the banks and main financial institutions.
However, there is evidence that consumer spending appears to have cooled this year. Industry data has shown retail sales falling in consecutive since the beginning of 2017, as consumers tighten their belts due to uncertainty in the economic outlook.
In addition to the plans to tighten consumer credit availability, the Bank of England credit survey also found that businesses are reluctant to invest at the moment and are also holding back due to economic uncertainty, resulting in less demand for business finance from lenders.