Credit crisis may force people to use more expensive lenders

The global credit crunch and more restrictive borrowing terms that many lenders have implemented may force consumers to go to higher-cost lenders, an expert from Equifax has said.

According to Credit Action, personal debt in the UK stood at £1,421 billion at the end of February 2008.

Total lending in February was up by £9.8 billion on the previous month, of which secured lending accounted for £7.4 billion and consumer credit was £2.4 billion.

Neil Munroe, external affairs director for Equifax, said that if banks reject more loan applications people “may be forced into more high-cost borrowing, so forced down into the subprime or near-prime market, whereas before they might not have considered going there”.

However, he also pointed out that banks have an “appetite” to lend people money, they will simply be more cautious when deciding whether to lend to people who they believe may not be in a position to repay the loan.

Tags: secured lending, Neil Munroe, uk, External Commercial Borrowing, credit crisis, loan applications people, equifax, consumer credit

People advised to stick to credit purposes

Consumers should use financial products for their “right purposes”, according to Sainsbury’s Bank.

Steve Baillie, head of loans at the bank, explained that using personal loans, credit cards and overdrafts for the correct purposes will help consumers avoid getting into debt without “anything to show for it”.

“Buying cars with overdrafts or buying cars on credit cards can be very expensive business if you look at the APR. And also, you’ve got to look at the lifetime value of the product that you’re buying,” he said.

Purchases with a short life over a long period should not be considered, he continued, before urging consumers to do their “research” in advance of taking on any new commintments.

Credit Action revealed that in September this year total spending grew by £11.2 billion, while secured lending was up by £9.8 billion in the month.

Similarly, there was total growth over the month in consumer credit lending to £1.4 billion.

Tags: overdraft, Unsecured debt, long period, Steve Baillie, credit, consumer credit

2006 credit card borrowing down

Credit card borrowing fell in December 2006, according to updated figures released by the British Bankers’ Association (BBA).

Following the release of figures from the Major British Banking Groups earlier this month, BBA has gathered more information,

This new data shows that credit card borrowing fell by £0.3 billion in December, with the overall annual figure rising by just two per cent.

“The annual growth in consumer credit, at only two per cent, is low by historical comparison and, although strong Christmas sales have been reported, our December figures suggest that spending was not fuelled by more borrowing on credit cards,” said David Dooks from BBA.

Mortgage lending in December fell in comparison to November, but even this figure was a seven per cent increase on the same month in 2005.

In total, mortgage lending reached £18.1 billion, with 123,518 mortgages being approved.

The average amount lent for the purpose of buying a home soared in comparison to December 2005, with the average amount being £146,400, nine per cent more than the year before.

“The final quarter of last year, despite seasonally lower activity in December, showed the mortgage market to be stronger than at the same time a year earlier and lending still growing significantly at a time of rising interest rates,” added Mr Dooks.

Tags: consumer credit, quarter, british bankers association, increase, activity, interest, Association, information