Lenders risk being overwhelmed by credit applications when the UK lifts lockdown restrictions, according to data specialist LendingMetrics.

The company behind the award-winning ADP automated underwriting platform fears a leap in demand for finance when the country returns to more normal conditions. It predicts this to be likely by June or July, if the vaccine rollout allows a reopening of retail activity. What is more, this substantial increase in applications could continue until the end of the year.

David Wylie, Commercial Director of LendingMetrics, said “There’s a big demand bulge that is going to lead to a very, very big bounce back in lender activity. We’re seeing a lot of pent-up spending that is not going away – for example on holidays and home improvements. Everyone’s going to want to make up for the months of lockdown, and because Christmas spending was so restricted last year, we expect people to double-down on it in 2021.’

Wylie said that demand for credit would be particularly strong at point-of-sale and for specialist finance in areas such as holidays. However, some credit providers may not be ready for such a sudden upsurge in their application pipeline.

“Lenders might not have the ability to stretch quickly to meet jumps in demand. What we’re concerned about is that the surge may start from the summer and continue after that, leading to a huge increase in demand that finance providers may not be ready for. They need to be in a position to handle that increased level of business, and I am not sure some of them will be able to, which could lead to some significant problems.”

Wylie suggests that lenders should ensure they do all they can in the run-up to the summer to prepare for the turnaround, prioritising investment in back-office efficiencies and considering automated underwriting decisioning. “Now really is the time for providers to test the existing systems that they have in place, to make sure they can cope with a surge in applications. If they can’t, there may still be time to do something about it,”