Fragile Time For Loan Markets
The past couple of years or so have seen the availability of any kind of loan reduce drastically, as lenders tighten their lending criteria and struggle to obtain the necessary wholesale funding to supply loans to borrowers.
Despite some signs of growth in the UK economy, both lenders and borrowers are still extremely cautious about offering or taking out a new loan, largely due to the uncertain economic climate and the latest figures from the Finance and Leasing Association (FLA) have revealed just how much this has hit the loan market.
The figures show that consumer credit was down by 9 per cent in April this year, compared with the same time last year, with certain areas of lending being hit harder than others.
Lending on store cards reduced by 14 per cent over the year, credit card borrowing reduced by 12 per cent and in store credit agreements reduced by 19 per cent.
The worst hit areas however, have been unsecured loans and secured loans, or second charge loans. There was a reduction of 42 per cent in the amount of lending on unsecured loans over the course of the year and a reduction of 20 per cent on secured loans.
And with the possibility of new regulation being introduced to the loan market, particularly for secured loans, which could restrict lending further and even place a complete ban on certain types of loan such as self certification loans, there is even more growing uncertainty over the future of the loan markets.
Fiona Hoyle of the FLA said “Consumer spending is vital to the economic recovery. Today’s figures show how fragile the consumer lending markets remain. The government should help reduce uncertainty in the markets by clarifying its plans for consumer credit regulation.”
