Consumer Credit in the UK - Key Trends and Opportunities to 2018

Published: Nov, 2014 | Pages: 81 | Publisher: Timetric
Industry: Financial Services | Report Format: Electronic (PDF)

Synopsis
• This report provides market analysis, information and insights into the UK consumer credit industry
• It provides a breakdown of the different forms of consumer credit in the UK
• It analyzes drivers and the outlook for the market 
• It provides information on the main banks in the UK market
• It covers news and regulatory developments

Summary
Consumer credit increased throughout 2014, as economic recovery gained momentum
Consumer credit growth has shown consistent signs of growth in 2014, for the first time since before the financial crisis. This is in a large part due to consumer confidence also recording a positive number for the first time since the credit crunch, low interest rates and a steadily growing GDP, as nearly every category of lending has grown up to July 2014.Demand for and availability of credit also grew in both the second and third quarters of 2014, which has been a key factor.

Record-low interest rates on personal loans driving other loans and advancements category
HSBC became the first lender to break the 5% interest rate barrier for its GBP7,500–15,000 personal loan, which launched a price war between mainstream lenders, as each bank or building society tried to get to the top of the comparison tables. Tesco lowered its interest rates soon after, and Sainsbury’s raised its upper limit to GBP 35,000 in October – a record high personal loan. This means that lending is cheaper than ever for consumers, which has unsurprisingly given the industry a huge boost. The personal loan category was hit harder than any other in the aftermath of the financial crisis, and the stock of personal loans remains over GBP30.0 billion below its January 2008 total, so there is still ample room for recovery.

Central bank rate at remains at 0.5%; rise no longer imminent, but still set for mid-2015
The Bank of England’s (BoE) base rate has been at a record low since March 2009, at0.5%, meaning that financial institutions have had much cheaper access to credit; the rate looks set to rise in mid-2015, however. This was expected sooner, but a contraction in real wages and weaker global growth looks set to delay the increase by at least a quarter.
This will cause the cost of credit to rise, as banks will have to pay more for funds. Increases will be very steady, however, and the first rise will only be to a maximum of 0.75%, meaning any setback to the industry should be minor.

Consumer confidence and demand and availability both improving in 2014
Consumer confidence was positive in July 2014 – the first time since before the financial crisis, with a score of 1 for the month – and the index’s recent surge has helped to drive the consumer credit industry during this year. The index averaged -29.1 in 2012 and -19.9 in 2013, but just -6.8 in 2014. This improvement is expected to continue, as it has risen throughout 2014, although the BoE increasing the central bank rate could set it back temporarily.

Both demand for and availability of credit increased in the second and third quarters of 2014, as the overall industry has grown. Previously, demand had generally outstripped availability since 2009, as banks became reluctant to approve loans, though availability also remained in negative net percentage balances until 2011.

Motor finance continues to record extraordinary growth
Motor finance is the only typical form of consumer credit that has recorde substantial growth for a prolonged period. Both the number of new cars bought from dealerships and the value of advances paid on new cars have grown monthly on the previous year, staying at consistently above 20% since the beginning of 2012.
Student loan figures surge as higher tuition fees introduced

The student loan category is not affected by the same factors as the rest of the consumer credit industry, as growth has been driven by the number of students and cost of tuition continuing to rise. The substantial jump from GBP3.97 billion in 2012–2013 to GBP 5.66 billion in 2013–2014 represents the impact of increased tuition fees.
Credit card market begins to recover after extremely difficult period

Much like the personal loan category, credit cards suffered massively during the credit crunch. Gross lending on credit cards has been growing since 2013, which shows the industry is recovering. Repayments have been rising at a very similar rate, however, which suggests consumers still remain wary of debt.

Scope
• This report provides market analysis, information and insights into the UK consumer credit industry
• It provides a breakdown of the different forms of consumer credit in the UK
• It analyses drivers and the outlook for the market 
• It provides information on the main banks in the UK market
• It covers News and regulatory developments

Reasons To Buy
• Gain an understanding of the UK consumer credit industry	

Key Highlilghts
Consumer credit growth has shown consistent signs of growth in 2014, for the first time since before the financial crisis. This is in a large part due to consumer confidence also recording a positive number for the first time since the credit crunch, low interest rates and a steadily growing GDP, as nearly every category of lending has grown up to July 2014.Demand for and availability of credit also grew in both the second and third quarters of 2014, which has been a key factor.

 Table of Contents

1 Executive Summary
2 Introduction
2.1 What is this Report About?
2.2 Definitions
2.3 Methodology

3 Market Analysis
3.1 Total Lending
3.1.1 Total stock of lending
3.1.2 Total gross lending
3.1.3 Total net lending
3.2 Lending by Institution
3.2.1 Lending from MFIs
3.2.2 Lending from other sources
3.3 Lending by Type of Credit
3.3.1 Credit cards
3.3.2 Other loans and advances

4 Consumers
4.1 Consumer Confidence
4.2 Demand for and Availability of Credit
4.2.1 Demand
4.2.2 Availability
4.3 Economic Climate
4.3.1 Interest rates
4.3.2 Energy bills
4.3.3 Source of debt
4.4 Retail Sales
4.5 Lending to the Underbanked, Unbanked and Sub-Prime Customers
4.5.1 Unbanked consumers

5 Market Outlook

6 Completive Landscape
7 Regulation and Policy
7.1 Regulators
7.1.1 Financial Conduct Authority (FCA)
7.1.2 Prudential Regulation Authority (PRA)
7.1.3 Monetary Policy Committee (MPC)
7.1.4 Treasury Committee
7.1.5 Competition and Markets Authority (CMA)

8 UK Bank Profiles
8.1 Santander UK Plc
8.2 Lloyds Banking Group
8.3 Barclays Plc
8.4 Royal Bank of Scotland Group Plc
8.5 HSBC

9 Personal Loans Offered
9.1 Santander UK Plc
9.2 Royal Bank of Scotland Group Plc
9.3 HSBC Bank Plc
9.4 Barclays Plc
9.5 Lloyds Banking Group
9.6 Nationwide

10 Statistics
10.1 Review Period (2009–2013)
10.2 Forecast Period (2014–2018)

11 News

12 Appendix
12.1 Methodology
12.2 Contact Timetric
12.3 About Timetric
12.4 Timetric’s Services
12.5 Disclaimer

List of Tables
Table 1: The UK – Consumer Credit Market (GBP Billion), 2009–2013
Table 2: The UK – Consumer Credit Lending (GBP Million), 2014–2018

List of Figures
Figure 1: UK – Outstanding Consumer Credit (GBP Million), 2010–2014
Figure 2: UK – Consumer Credit Gross Lending (GBP Million), 2012–2013
Figure 3: UK – Annual Consumer Credit Gross Lending (GBP Million), 2009–2013
Figure 4: UK – Total Gross Lending and Repayments: 2013–2014
Figure 5: UK – Total Net Consumer Credit Lending: 2013–2014
Figure 6: UK – Outstanding Consumer Credit from MFIs (GBP Million), 2010–2014
Figure 7: UK – Consumer Credit Gross Lending from MFIs (GBP Million), 2010–2014
Figure 8: UK – MFI – Gross Lending and Repayments: 2013–2014
Figure 9: UK – MFI Net Consumer Credit Lending: 2013–2014
Figure 10: UK – Outstanding Consumer Credit from Other Sources (GBP Million), 2010–2014
Figure 11: UK – Annual Consumer Credit Gross Lending from Other Sources (GBP Million), 2010–2014
Figure 12: UK – Other Consumer Credit Lenders – Gross Lending and Repayments: 2013–2014
Figure 13: UK – Other Consumer Credit Lenders – Net Consumer Credit Lending: 2013–2014
Figure 14: UK – Outstanding Consumer Credit – Credit Card Loans (GBP Million), 2011–2013
Figure 15: UK – Annual Outstanding Consumer Credit – Credit Card Loans (GBP Million), 2011–2013
Figure 16: UK – Credit Card Gross Lending (GBP Million), 2012–2013
Figure 17: UK – Annual Credit Card Gross Lending (GBP Million), 2012–2013
Figure 18: UK – Credit Cards – Gross Lending and Repayments: 2013–2014
Figure 19: UK – Other Consumer Credit Lenders – Net Consumer Credit Lending: 2013–2014
Figure 20: UK – Value of Credit Card Purchases (GBP Million), 2008–2013
Figure 21: UK – Number of Credit Card Purchases (Million), 2008–2013
Figure 22: UK – Number and Value of Credit Card Purchases (GBP Million), 2010–2014
Figure 23: UK – Write-Off Growth Rates on Credit Card lending from Banks
Figure 24: UK – Interest Rates on Credit Card Loans: 2010–2014
Figure 25: UK – Stock of Consumer Credit from Other Loans and Advances, Monthly: 2011–2013
Figure 26: UK – Annual Stock of Other Loans and Advances: 2010–2014
Figure 27: UK – Other Loans and Advances, Gross Lending, Monthly: 2012–2013
Figure 28: UK – Annual Other Loans and Advances, Gross Lending, 2012–2013
Figure 29: UK – Other Loans and Advances – Gross Lending and Repayments: 2013–2014
Figure 30: UK – Other Loans and Advances – Net Consumer Credit Lending: 2013–2014
Figure 31: UK – Overdraft Lending, Monthly Amounts Outstanding (GBP Million), 2009–2014
Figure 32: UK – Overdraft Lending, Annual Amounts Outstanding (GBP Million), 2008–2014
Figure 33: UK – Interest Rates On UK Overdrafts (%), 2009–2014
Figure 34: UK – Revenue From Arranged and Unarranged Overdraft Charges (GBP Million), 2011–2013
Figure 35: UK – Personal Loans, Outstanding Amount (GBP Million), 2011–2013
Figure 36: UK – Personal Loans, Gross Lending (GBP Million), 2011–2013
Figure 37: UK – Interest Rates on Personal Loans 2009–2013
Figure 38: UK – Motor Finance Dealership Lending, New Cars – Value of Advances and Percentage Change on Previous Year: 2011–2014
Figure 39: UK – Motor Finance Dealership Lending, New Cars – Number of Cars bought and Percentage Change on Previous Year: 2011–2014
Figure 40: UK – Motor Finance Dealership Lending, Used Cars – Value of Advances and Percentage Change on Previous Year: 2011–2014
Figure 41: UK – Motor Finance Dealership Lending, Used Cars – Number of Cars bought and Percentage Change on Previous Year: 2011–2014
Figure 42: UK – Student Loans, Overall Amount Awarded (GBP Million), 2010–2013
Figure 43: UK – Retail Store and Online Credit, Monthly: 2011–2014
Figure 44: UK – Retail Store and Online Credit, Growth Rate on Previous Year: 2011–2014
Figure 45: UK – Paydays Loans, Percentage of Revenue of Loans Rolled Over or Refinanced, 2012
Figure 46: UK – Payday Loans, Percentage of Loans Rolled Over or Refinanced, 2012
Figure 47: UK – GFK Consumer Confidence Index, January 2012 to September 2013
Figure 48: UK – How has Demand for Total Unsecured Credit from Households Changed: 2007–2014
Figure 49: UK – How has Availability for Total Unsecured Credit for Households Changed: 2007–2014
Figure 50: UK – Lending, Salaries, Inflation and Annual Increases (%), 2011–2014
Figure 51: UK – CPI Monthly Inflation Rate (%), 2009–2014
Figure 52: UK Bank of England Official Bank Rate (%), 2004–2014
Figure 53: UK Annual Gas and Electricity Bills: 2004-2013
Figure 54: UK Source of Debt: 2013
Figure 55: UK – Spending on Higher-Value Items, Monthly (GBP Billion), 2010–2014
Figure 56: UK – Spending on Higher-Value Items, Monthly (GBP Billion), 2010–2014
Figure 57: UK – Spending on Higher-Value Items, Annually (GBP Billion), 2008–2014
Figure 58: Total Consumer Credit: Outstanding Balances Forecast: 2014–2018
Figure 59: Total Gross Consumer Credit Lending: Forecast: 2014–2018
Figure 60: Credit Card Lending: Outstanding Balances Forecast: 2014–2018
Figure 61: Other Loans and Advancements Lending: Outstanding Balances Forecast: 2014–2018
Figure 62: UK Credit Card Market Shares: 2013
Figure 62: UK Personal Loan Outstanding Balances: Market Shares: 2013
Figure 63: UK Banking Regulatory Framework, 2014