LONDON, April 13 (Reuters) - British lenders expect to rein in the supply of new mortgages in the coming quarter but there was scant sign of a wider credit crunch following recent stress in the global banking system, a Bank of England survey showed on Thursday.
Officials have been watching out for any tightening in British credit conditions in light of the failures of Credit Suisse and Silicon Valley Bank last month.
"Despite all the monetary tightening and the turmoil of March, there is not too much evidence of banks pulling back," said Liz Martins, an economist at HSBC - though she noted that the survey ran from Feb. 27 to March 17, so some responses would have predated the bank collapses.
Nonetheless, Thursday's credit conditions survey is likely to allay worries that a widespread seizing-up of credit markets poses a big risk to Britain's economy, which has shown little momentum of late.
Lenders signalled that loan spreads - the additional interest that banks charge to borrowers over and above the market rate - were likely to narrow in the second quarter.
Spreads on mortgages had widened sharply due to the financial market turmoil unleashed in September during former prime minister Liz Truss's short-lived premiership.
Still, Thursday's survey showed weakness in lending intentions remained centred around the housing market, which has slowed in recent months as the Bank of England has raised interest rates to 4.25%, up from 0.1% in December 2021.
The BoE said lenders plan to restrict the supply of secured lending to households in the second quarter, with mortgage approvals data already showing signs of a sharp slowdown.
While that may weaken housing market activity in the months ahead, the survey showed lenders expect to increase the supply of consumer credit and maintain existing levels of corporate lending in the coming months.
The quarterly Credit Conditions Survey also showed rising default rates across mortgages, consumer credit and corporate loans during the first quarter. Lenders expected them to rise further in the second quarter.
