23 July 2020
The unprecedented effects of the COVID-19 crisis are well-known: the impact on the health of those with disease, on the health services, on people who are self-isolating, on businesses are affected by lockdown, and on people who are furloughed, working from home or have been unable to work.

These social and economic effects play out in terms of finance for corporates and households. Let's take a look at just one strand of this: consumer finance. The latest Bank of England data shows a very sharp contraction in unsecured lending to households.
The survey on credit conditions for Q2 out last week gives us some insight into drivers and gives some possible pointers to the future. If you're not familiar with the Bank of England survey, it's worth reading up how they put it together. Let's take a look at a couple of charts from that survey, starting with the results for unsecured credit availability for households.
As might be expected, the responses are consistent with the sharp reduction in supply of consumer credit as banks scale back supply. The same survey indicates that the main reasons are a combination of the changing economic outlook and also changing appetite for risk by lenders.

Take a close look at that little red diamond. It shows the expectation over the next three months – as you see respondents to the survey think that the supply of credit is going to continue to shrink.

Now let's look at unsecured credit demand from the same survey. Here it is split into credit cards and other unsecured lending.
This reflects the parallel very sharp reining in of credit demand and increased net repayment of debt during Q2 as consumers reduce their spending on discretionary items or on consumption that can be delayed. This is further reflected in the detail behind the survey pointing to increased margins and shorter maturities. But notice those red diamonds again: these show the expectation that households will want access to more credit.

So what will the next few months bring? Survey results and expectations should not be taken as gospel truth, and the survey expectations have not always proved particularly accurate predictions, and forecasting what might happen after such a large shock is bound to be particularly fraught. But it is striking that the gap between the survey results for expected supply and expected demand is larger now than at any time since 2007, is as far back as the survey results go. As COVID-19 restrictions ease, it looks likely that households will want more credit but traditional lenders may not be willing to supply as much as they would like, resulting in a gap between supply and demand.
Looking at just one slice of the total picture of borrowing and lending provides food for thought about how quickly lending to households will start to pick up again and about whether consumers will find it difficult to obtain the finance they need. This is where a company like Fintern can step in to help bridge the gap. By being able to join the dots in customers' financial situation through the use of Open Banking information, Fintern will be able to see customers' real underlying affordability and provide credit to consumers that are not well-served by traditional banks.

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We're excited to announce that Fintern is now live and accepting loan applications!

As a quick refresher, while we don't require a long credit history to apply for a loan, we do need you to:

- Be at least 18
- Live in the UK
- Have at least one UK bank account
- Have no unresolved defaults or CCJs

To apply for a Fintern loan, simply download the Fintern App using the relevant link below*.
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