UK Consumers Reduce Borrowing Due To Credit Crunch

Mon, 29 Oct 2007

British consumers are set to reduce the amount of unsecured debt they take on this year as lenders raise their rates and reject a higher proportion of applicants, a new report highlights.

Independent market analyst Datamonitor expects the UK consumer credit market to slide in 2007 as the global credit crunch continues to have an affect on UK markets.

According to recent data from price comparison site Moneyfacts.co.uk, personal loan rates have increased by up to 4 per cent. Meanwhile lenders are tightening their criteria on both mortgage and other debt in response to volatility in capital markets and higher perceived risk among borrowers.

The number of rejected mortgage applications has surged by almost 60 per cent over the past six months, as five increases in the base rate since August last year start to bite and borrowers come up against tougher lending rules.

Datamonitor said that such will ensure the continuation of a slowdown in consumer credit that began in 2005, although it expects the market to pick up next year, growing from £207.4 billion in gross advances in 2006 to £229.8 billion in 2011.

Overall consumer credit advances came to £50.5 billion in the second quarter of this year, a reduction of 1.2 per cent on the previous quarter and down 3 per cent on the year-ago period.

Outstanding balances rose by 0.4 per cent on the quarter and 1 per cent on the year to a total £213.8 billion, as consumers cut down on spending and repaid more debts .
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