SUMMARY- Consumer Credit is slightly down and bank loans are up, inflation is rising and people are spending less
Consumer Credit down but likely to grow
The Finance & Leasing Association (FLA) has released market information demonstrating that consumer finance new business fell by 2% in April year on year. Credit card and personal loan new business grew by 3% compared with April 2016, while retail store and online credit new business fell by 4%. Second charge mortgage new business was up 53% by value and 36% by volume over the same period. Geraldine Kilkelly, Head of Research and Chief Economist at the FLA, stated “In the first four months of 2017, FLA consumer finance new business increased by 4%. The latest research from Oxford Economics, on behalf of the FLA, suggests that total UK new consumer credit is likely to grow by 2.1% in 2017 overall.
“The strong growth in second charge mortgage new business in part reflects lower than usual new business volumes in April 2016, which was the first month following the transfer of the regulation of this market to the Financial Conduct Authority’s mortgage regime.”
Bank Loans Growing
According to Eric Leenders of the British Banking Association, the BBA’s data showed that consumer credit growth in banking was 6.4% in April, compared with 6.1% in the previous month. Gross mortgage borrowing totalled £13.4 billion in April. Net mortgage borrowing was 2.4% higher than a year ago.
Inflation Up
According to Money Charity stats for June the rate of inflation last month was the highest for nearly four years at 2.9%. Net lending to individuals is increasing at £143 million a day. Government debt grew by £347 million in April which is £4,000 per second. Personal debt grew year on year to over £1.5 trillion (+3 per cent) equates to an extra £887 per UK adult. Individual savings year on year are at a record low with only 3.3% of net earnings being saved on average. This is half the level of last year. There were 4.921 million working age unemployed claiming benefits which is an annual decrease of 5 per cent. There were 425,000 unemployed 18-24 year olds, which is also a 5 per cent decrease.
According to VISA, household spending has fallen for the first time since 2013. With rising prices and flat wage growth, householders are feeling the pinch and their index suggests consumers were reining in their discretionary spending.
Plough & Share Credit Union has closed down after it fell into default and announced it was unable to repay deposits. The union had 2,550 members.