CCR Magazine

You are here  :Home arrow News arrow The winds of change are building for consumer credit
Contact Us Newsletter Signup RSS Feeds

Latest News Headlines

Headlines

 
Commercial Credit News

Headlines

 
The winds of change are building for consumer credit PDF Print E-mail
Wednesday, 27 September 2017
“There can be little doubt that the consumer credit market is set to face major change, with an increase in interest rates now firmly on the cards and the Bank of England signalling for increased lending prudence. Following virtually a decade of upward growth for our sector, the motor finance sector needs to be prepared for what for many will be a new experience, rising interest rates and tighter credit conditions,” observes Karl Werner CEO of MotoNovo Finance’s Motor Division, reflecting on the latest Bank of England Financial Policy Committee (FPC) Statement.  

Published on September 25th from the FPC meeting on September 20th, the Bank of England makes it very clear that the lending community, at least in part, risk underestimating the impact of a rise in consumer defaults in an economic downturn, noting;

“Within a benign overall domestic credit environment, there is a pocket of risk in the rapid growth of consumer credit. Although the overall credit quality of consumer credit has improved significantly since the financial crisis, the FPC judges that lenders overall are placing too much weight on the recent performance of consumer lending in benign conditions as an indicator of underlying credit quality. As a result, they have been underestimating the losses they could incur in a downturn.”

Within the Statement, the Bank of England estimates that in a "severe downturn," UK banks could incur losses of £30bn.

The signal for an increase in prudence from the Bank of England have been building throughout 2017. There has been a growing concern about the expansion of consumer indebtedness and the capacity of consumers to manage their credit in the event of a rise in interest rates. With all the signals that the first increase in interest rates in more than a decade is now firmly on the cards, evidenced by a sharp rise in LIBOR money costs, the risks of an increase in bad debt are very apparent.

“The winds of change in consumer credit have been building for a while now; it is time to re-calibrate in certain areas, notably risk management and pricing. As a business, our success and that of our dealers has come from a long-term approach and seizing ‘first mover advantage’ in areas such as innovation and technology. To secure long-term success and to support customer retention, we will not be afraid to move first to help secure the long-term future of dealer finance, no dealer benefits from choosing a lender with a model which proves unsustainable,” concludes Werner.
 

 Forums International Ltd

Forums International Ltd

 Attendance at your first meeting is free of charge, and please quote reference 'CCR2016' to receive the special 10% discount off of your first annual subscription.

Find out more here.

latest issue

CCR Cover

The latest edition of CCR Magazine, the leading editorial publication in the UK credit industry, is out.

Read the latest issue online

subscriptions

CCR is the premier magazine for consumer and credit professionals. It provides an independent voice to the industry, breaking major news stories and running in-depth features.

As a magazine, it works with and campaigns on behalf of the credit industry to promote its importance as a centre of potential profit and business development to the wider business world.

Subscribe to CCR Magazine

CCR World Magazine


 

Providing information and analysis for thousands of senior credit professionals worldwide, every quarter.

Find out more

GTS Media Ltd
81 Cambridge Road
Southend-on-Sea
Essex
SS1 1EP

Registered in England No: 05483197