January sales boost consumer credit at start of 2023

The FLA today released its January update on the consumer credit market which showed modest growth overall but a strong start to the year for the retail and store credit market as consumers hit the January sales.

Total consumer finance hit £8.95 billion in January 2023 – an increase on January 2022 of 1% – but retail store and online credit saw growth of 11% compared to the same month a year ago with total finance of £741m.

The second charge mortgage market also saw its robust growth continue with over £100m of financing (£103m), an increase of 14% compared to January 2022. The 12 months to January 2023 has seen total financing of £1.57 billion, an expansion of 37% against the previous 12 month period.

Andrew Fisher, Chief Growth Officer at Freedom Finance, one of the UK’s leading digital lending marketplaces, commented: “The consumer credit market saw slight growth at the start of 2023 as people continue to battle high energy bills and the impact of soaring inflation.

“The retail store and online credit sector experienced a particularly strong start to the year as shoppers hit the January sales. Embedded finance is revolutionising this market by supporting customers with credit products where and when they need it through the touchpoints of the digital customer journey.

“The latest Bank of England data encouragingly suggests that the cost of consumer credit may have peaked, with average rates across personal loans and credit cards both declining at the start of 2023 after significant increases in the last year. As cost-of-living pressures recede through 2023, we could see expenditure and consumer confidence rebound driving further growth in the lending market.

“For consumers, the most important thing when shopping for loan products is to utilise all the available tools and technology to get a deal that suits their individual circumstances. This involves shopping around and comparing different products. Soft-search technology and digital marketplaces can help consumers with this by excluding products they are not eligible for to avoid declines while extra data from open banking providers may even change a customer’s risk profile, opening up more products.”

On 2nd charge mortgages, he said: “The second charge mortgage market got off to a flyer in 2023. Many of the economic tailwinds that drove substantial growth through last year remain strong with rising rates making re-mortgaging an unattractive option for those on longer-term fixed-rate deals. Debt consolidation is another significant driver for the second charge market as people look to re-finance more expensive borrowing.”