Credit, Collections & Insolvency News
The Bank of England has today published its latest monthly Money and Credit report showing growth in consumer credit of 9.5 percent in the year to December 2017 up from 9.3 percent in November. Outstanding balances for consumer credit now stand at over £207.1 billion .The 8.9% growth in credit card lending has pushed the total borrowed on cards beyond the £70 billion mark to £70.2 billion.
Commenting on the report Joanna Elson OBE, chief executive of the Money Advice Trust said “With outstanding balances on consumer credit now standing at over £207 billion it is clear many households are continuing to rely on borrowing to manage their finances. While most people will be able to cope with repayments, there could be challenging times ahead for many households already struggling with rising living costs and wage growth that is unable to keep up.
Whilst Steve McNicholas, Managing Director – Credit and Marketing Data, Callcredit Information Group, said “Despite mortgage approval rates falling in December, borrowing levels remain at a record high with consumer credit lending growing by 0.4% since November. This is concerning in light of the upcoming termination of the Funding for Lending Scheme and Term Funding Scheme, which will likely result in extra charges for borrowers and rising mortgage costs.”
“It is important that lenders don’t have a knee-jerk reaction to the scheme changes, for example by loosening their lending practices in an attempt to offset the impact. In order to protect individual borrowers but the wider economy from a rise in unsustainable household debt, robust affordability checks must always remain integral to any lending process – regardless of the market conditions.”
In response to the figures, research fromStepChange Debt Charity show over 405,000 more people got in severe problem debt in the last 9 months of 2017, amounting to 3.3 million consumers.
Peter Tutton, Head of Policy at StepChange Debt Charity, said “Whilst the steady growth in consumer credit does not necessarily indicate a debt ticking timebomb, the number of households tipped into severe problem debt is on the rise. “With January still the busiest period for debt advice, those already falling behind with essential bills and credit repayments need better support. As the Treasury has committed to introducing a Breathing Space scheme to help people manage problem debt, it’s crucial government get this right so that debt advice charities can provide people the best chance of recovery and get their lives back on track.”
Gillian Guy, Chief Executive of Citizens Advice said “It is a cause for concern that the growth in consumer borrowing has quickened at a time when many people are struggling with debts. We are especially worried that the growth of credit card borrowing has also ticked up after a period of slowdown as our research shows people who use credit cards are more likely to get trapped in debt.”
“It is important that credit card companies play their part in making sure people do not take on unaffordable debt by scrapping uninvited credit limit increases.”