BoE Money and Credit figures: “Not an easy time to be making financial decisions”

“Whichever way you look at it, it’s not an easy time to be making financial decisions. Prices are rising, interest rates are rising, and a recession looks increasingly likely at some point this year. At times like this, when businesses and people are having to make tough calls about whether to buy or borrow, the credit industry plays a vital role in providing flexibility and some much needed stability to financial outgoings.

“What these figures from the Bank of England highlight, is how fluid the demand for credit currently is. In the mortgage market, net borrowing is down, as people opt to pay down debt to get ahead of anticipated interest rates rise. Meanwhile, borrowing in the consumer credit space is above its pre-pandemic average for the third consecutive month, pointing to greater demand on shorter term forms of borrowing; some of this will be discretionary, but much of it will not.

“The Government and the Bank of England have taken steps to temper the full impact of the cost of living crisis, most recently with the Energy Bill Discount Scheme, but the measures announced so far will only soften the blow. At Equifax, we have already seen a rise in the number of people struggling to pay bills and pay off existing debts, and much of the demand for new credit is by those looking for a way to ride out the crisis.

“The credit industry has a huge responsibility, to lend only to those that can afford to borrow, to not turn its back on those sub-prime borrowers that would otherwise be tempted to turn to unregulated or illegitimate sources of capital, and to care for existing customers. This crisis is not like the last. Open Banking and a decade of data science have given us the ability to lend more confidently, more judiciously, and to provide pre-emptive help to those that need it.”

Jayadeep Nair, Chief Product and Marketing Officer at Equifax UK