Unsecured credit to UK households contracted in Q4 2017, the Bank of England’s (BoE) quarterly Credit Conditions Survey has found, with lenders expecting the trend to continue in the coming quarter.

Lenders also said they intended to tighten criteria for the unsecured credit sector, after an increase in default rates during Q4.

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Overall demand for unsecured lending products excluding credit cards fell during the period, for the first time since 2015.

Secured lending products, meanwhile, registered stable levels of demand, and a slight contraction in default rates.

Howard Archer, chief economic advisor to the EY Item Club, said that the survey’s results were “reassuring” for the BoE.

He said: “It may be that heightened uncertainties over the outlook and increased concerns over personal finances are encouraging some consumers to be more cautious in their borrowing. However, the persistent squeeze on consumer purchasing power is likely to continue to fuel the need for some consumers to borrow.

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“It remains to be seen just how much effect the Bank of England’s interest rate hike has had on dampening consumers’ willingness to borrow.

“While the increase was just 25 basis points and interest rates are still at historically very low levels, there could well have been a significant psychological impact on potential borrowers given that it was the first interest rate hike since 2007.

“The Bank of England wants banks to provide evidence that they are lending responsibly to consumers and have not become complacent, but has stopped short of tightening borrowing controls.”