The Bank of England has recently released a survey which shows many high street lenders have cut access to credit in the year up to April and plan to get even tougher on credit card users. This trend may be welcomed by financial regulators after they warned of rapid growth in borrowing over the previous year or more. They warned households were taking on readily available debt which could become a problem if interest rates rose, making the debt unaffordable.

This news about tighter restrictions on consumer spending follows signals that households have been saving less and increasingly turning to borrowing to fund big ticket purchases such as cars and holidays. The Bank of England’s own figures show that there was increased spending on credit cards, car loans and second mortgages, commonly known as ‘consumer credit’. The figures show this spending was up nearly ten per cent in the year to November, which is the fastest growth for eleven years.

Charities have warned that some households are becoming increasingly vulnerable to exposure to credit and debt which becomes affordable with even a small rise in interest rates. The Bank’s survey shows credit score criteria for granting credit cards and other unsecured loans had tightened in the first quarter of this year. Lenders are expected to further significantly tighten the credit score criteria for the granting of unsecured credit.

Many experts suggest that it is vital that the banks adopt tighter lending standards in granting unsecured consumer credit, otherwise it risks causing serious debt problems for the economy and defaults on debt for consumers.

It is certainly a delicate line to tread as choking off available credit would probably cause a slow down to the economy which continues to perform resolutely. Consumer spending has always been a key component in a healthy British economy.

Certainly, anecdotally, having advised dozens of police officers in my role as debt advisor for various police federations including Greater Manchester Police (GMP) and Lancashire Police Federation it seems that credit is freely available with unsecured loans and other finance being made available to officers, some of whom have less than favourable credit ratings. Maybe I have yet to see the tightening of the banks lending criteria filter down to the officers I see who are in debt.

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