New Loans Fall By 12 Per Cent From Last Year
It probably doesn’t come as much of a surprise to many people reading this that the overall amount of lending on new loans has dropped since the same period last year, due to the effects of the credit crunch.
But the most recent report from the Finance and Leasing Association (FLA) has revealed that there has been an overall reduction in the amount of new loans to consumers of 12 per cent in the month of March this year, compared with the same time last year, with a total of only £58 billion being offered in loans during March this year.
The worst affected sector of the loan market has been, rather predictably, secured loans which have suffered a drop of 76 per cent in new business over the course of the year, as loan companies are still finding it difficult to obtain funding on the wholesale money markets, forcing many to withdraw from the market altogether, or impose a much stricter lending criteria. On the other hand, credit cards have only dropped by around 3 per cent and in store credit arrangements have actually seen an increase in new loans, as retailers are forced to offer more incentives to customers to buy products during the economic down turn.
Geraldine Kilkelly of the FLA said “Overall, consumer finance is still being hit by the down turn. With a depressed housing market many people are choosing to improve their homes and replace furnishings rather than move house. Retailers and lenders have been offering attractive interest free credit and deferred payment deals on store instalment credit. We have seen a similar trend in the motor market. The proportion of car sales represented by instalment type credit available in the dealerships has grown from 48% to 54% over the last year. This is mainly a response to competitive pricing and reduced availability of other sources of credit.”
