When credit stopped being cheap
Through 2022 the cost-of-credit perception flipped from deeply cheap to firmly expensive, and the mini-budget knocked availability to a post-Covid low. The borrowing terms of 2021 were no longer on offer.
- Dated
- 20 October 2022
- Desk note
- Dated to the data
- Reading
- 6 min
Managing Director
Over 2022 the cost of credit stopped being cheap. On Deloitte’s CFO Survey, the net balance rating new credit costly swung from −73% at the end of 2021 to +47% by the third quarter of 2022: more than a hundred points in a year, or an implied costly-share moving from about 14% to roughly 74%. Availability turned negative for the first time since 2020, and Bank Rate reached 2.25%. The borrowing terms of 2021 are simply no longer on offer, and the turn was fast enough to punish anyone who waited.
This is a note from the desk written into the turn, not after it. As of late October 2022 the picture is still moving. The mini-budget of 23 September has just repriced gilts, sterling and the forward rate path in the space of days. But the direction is no longer in doubt. The three charts below carry the story a lower-mid-market borrower needs: what credit now costs in the eyes of the people buying it, whether it can still be had, and the base rate underneath both.
How fast did the cost of credit actually turn?
Faster than any single facility’s margin would suggest. Deloitte asks CFOs each quarter whether new credit is costly or cheap, and reports the net balance. At the end of 2021 that balance sat at −73%: an overwhelming majority called credit cheap, the residue of two years at a 0.10% Bank Rate. By the third quarter of 2022 it had flipped to +47%. Expressed as an implied two-way share (the proportion that reading maps to rating credit costly), that is a move from about 14% to about 74% in three quarters.
Inside a year, the CFO verdict on credit flipped from cheap to expensive.
| Quarter | Implied costly share (%) |
|---|---|
| Q4 2021 | 14% |
| Q1 2022 | 34% |
| Q2 2022 | 49% |
| Q3 2022 | 74% |
- CFOs rating new credit costly (implied share)
The hard figures are Deloitte's published net balances (% rating new credit costly minus % cheap): Q4 2021 −73%, Q1 2022 −32%, Q2 2022 −3%, Q3 2022 +47%. The plotted line is an illustrative implied costly-share, reconstructed as (net + 100) / 2 to keep the axis on 0–100. It assumes a two-way costly/cheap split and so is a derived transform of the net balance, not a share Deloitte reports (the survey question carries a neutral option). The Q3 2022 survey was fielded and published in early October 2022, so it is the latest reading available on this post's date.
Source · Deloitte UK CFO Survey, dataset (Results of the regular questions), series UKCFOCCCR
+120
Points of swing in Deloitte's net cost-of-credit balance in three quarters: from −73% in Q4 2021 to +47% by Q3 2022. Expressed as an implied two-way share, that is a move from roughly 14% to 74% rating new credit costly.
Source · Deloitte UK CFO Survey, dataset (series UKCFOCCCR), Q4 2021–Q3 2022
The important feature of that line is not its height but its gradient. A borrower reading the market quarter by quarter through 2022 saw the perception of cost cross from firmly cheap to firmly expensive in the time it takes to run a single refinancing. There was no plateau on which to sit and wait for clarity; the clarity was the deterioration itself.
Did the money also get harder to find?
Yes, and this is the part that turns a pricing story into a timing one. Cost rising is a negotiation; availability closing is a constraint. Through the first half of 2022 CFOs still, on balance, called credit available. In the third quarter that balance went negative for the first time since the 2020 shock: more of the panel found credit hard to get than easy. The mini-budget landed squarely in that quarter, and the funding conditions it disturbed do not reset overnight.
Availability turned: for the first time since 2020, more CFOs found credit hard to get than easy.
| Quarter | Implied available share (%) |
|---|---|
| Q4 2021 | 80% |
| Q1 2022 | 70% |
| Q2 2022 | 59% |
| Q3 2022 | 45% |
- CFOs rating credit available (implied share)
The hard figures are Deloitte's published net balances (% rating credit available minus % hard to get): Q4 2021 +60%, Q1 2022 +40%, Q2 2022 +17%, Q3 2022 −11%. The plotted line is an illustrative implied available-share, reconstructed as (net + 100) / 2 to keep the axis on 0–100; it is a derived transform of the net balance, not a share Deloitte reports. The load-bearing fact is the net balance itself: Q3 2022 was the first negative reading since the 2020 shock, and the latest available on this post's date.
Source · Deloitte UK CFO Survey, dataset (Results of the regular questions), series UKCFOACCR
A word on the panel. Deloitte’s CFO Survey is weighted to large UK corporates, so its absolute levels are not a like-for-like read on a £3–15m facility. We use it for what it measures well (the timing and speed of the turn in sentiment on cost and availability), not as a direct gauge of lower-mid-market pricing. The hard figures are Deloitte’s own published net balances; the costly- and available-share lines are an illustrative two-way reconstruction of those balances, not shares Deloitte reports.
What was driving it, and what does it mean for a borrower?
Underneath the sentiment sits the base rate. The Bank of England left Bank Rate at an emergency 0.10% from March 2020, lifted it to 0.25% in December 2021, and then raised it at every meeting through 2022 to reach 2.25% by 22 September. For anything priced off a floating base (most sterling term and revolving debt references SONIA plus a margin), that increase fed through to the cost of carry almost immediately, before any lender widened a single spread.
The floor gave way: Bank Rate went from 0.10% to 2.25% in nine months.
| Effective | Bank Rate (%) |
|---|---|
| ’20.215053763441 | 0.1% |
| ’21.9569892473119 | 0.1% |
| ’22.0887096774193 | 0.25% |
| ’22.2096774193549 | 0.5% |
| ’22.3440860215053 | 0.75% |
| ’22.4569892473119 | 1% |
| ’22.5913978494623 | 1.25% |
| ’22.72311827957 | 1.75% |
| ’22.8010752688172 | 2.25% |
- Bank of England Bank Rate
Every Bank Rate change effective from the 0.10% pandemic low (held from 19 March 2020) to the 2.25% setting of 22 September 2022, charted as a step series held flat to this post's date of 20 October 2022. The 0.25% setting of 11 March 2020 is omitted; the series begins at the 0.10% low. All points are the Bank's own figures.
The base rate explains the floor; the CFO perception moved further because lenders were also widening margins and tightening terms as conditions turned. For a borrower, that gap is the whole lesson of a tightening cycle. The cost of the last basis point on your margin is small against the cost of losing access entirely — and in 2022 access was visibly narrowing while the debate about pricing was still going on.
In a tightening cycle, optionality is worth more than the last basis point. The borrower who moves early keeps the choice; the one who waits inherits whatever the market allows.
None of this is a forecast. The desk does not know whether Bank Rate settles a point higher or three, and the honest position is that the peak is unknowable from here. What the 2022 data settles is narrower and more useful: when a cycle turns, it turns quickly, and it closes availability before it finishes repricing cost. The response is not to predict the peak. It is to refinance from strength while the terms of 2021 are still recent enough to remember, because the window in which you hold the leverage is the first thing a tightening market takes away.
Questions a CFO asks
Common questions
- Should I refinance now that rates are rising, or wait for them to settle?
- The honest answer is that no one on the desk knows where the peak is, and neither does the market, so the decision cannot rest on calling it. What a tightening cycle changes is the value of optionality. Refinancing while availability is still open lets you choose your lender and lock terms; waiting for a settled rate risks meeting a market that has, in the meantime, become harder to raise in at all. In 2022 that trade-off moved fast: availability turned negative in a single quarter.
- Does a higher Bank Rate mean my facility automatically costs more?
- For anything priced off a floating base (most sterling term debt and revolving facilities reference SONIA plus a margin), yes, the base cost moves with the Bank Rate more or less immediately. Fixed-rate debt is insulated for its term but faces the new level at refinancing. The cost-of-credit reading is wider than the base rate alone: it also captures lenders widening margins and tightening terms as conditions turn, which is why the CFO perception moved further than Bank Rate did.
- Is the 2022 cost-of-credit reading comparable to my £3–15m facility?
- Directionally, yes; precisely, no. The Deloitte panel is weighted to large UK corporates, so its absolute levels are not a like-for-like read on a lower-mid-market facility. What it captures well is the turn: the moment and the speed with which sentiment on cost and availability changed. For a £3–15m borrower the practical signal is the direction of travel and the pace, both of which set the clock on any refinancing decision.