UK Consumer Credit Market Outlook: Q3 2006: Industry Report

UK Consumer Credit Market Outlook: Q3 2006

Product Type: Market Research Report
Published by: Datamonitor
Published: January 2007
Product Code: R313-18908

Description

Introduction
In the rapidly changing world of UK consumer credit, it is vital to stay on top of the latest trends. In this latest edition of our quarterly Market Outlook Series, we discuss the latest market and competitor developments in the UK consumer credit market and provide our latest forecasts.

Scope
Provides the latest marking sizing figures for the UK consumer credit market by product line and analyses industry trends in Q3 2006.

Covers unsecured personal loans, credit cards, motor finance, retail finance (store cards, installment credit and mail order credit) and overdrafts.

Details Datamonitor's latest scenario based forecasts for the future of the consumer credit market in an accompanying interactive Excel model.

Report Highlights
Q3 2006 data highlights that the UK consumer credit market continues to struggle.

Despite a much improved economy in 2006, higher interest rates and tight lending criteria have had a significant impact on the market.

Q3 2006 figures are down on our expectations at the beginning of the year. Furthermore, there has been very little competitor activity in the UK’s consumer credit market in Q3.

Reasons to Purchase
Review market performance in 2006 to place your performance in context to the market's.

View the latest independent quarterly and annual forecasts for the UK consumer credit market to plan your future strategy with confidence.

Understand the key challenges facing lenders in 2007 and the impact they are having on the market.

Table of Contents

DATAMONITOR VIEW 1

CATALYST 1

SUMMARY 1

METHODOLOGY 1

ANALYSIS 2

Q3 2006 data highlights that the UK consumer credit market continues to struggle 2

After years of steady growth the consumer credit market contracted in 2005 and looks set to do the same in 2006 2

In terms of product line, the performance of the first nine months of 2006 points towards a poor year for the majority of product lines 4

Indeed, most product lines continued to struggle in the third quarter of 2006 5

Despite a much improved economy in 2006, higher interest rates and tight lending criteria have had a significant impact on the market 9

While the economy has improved, inflation has been rising causing the Bank of England to increase interest rates 9

Lenders have continued to keep lending criteria tight as bad debts rise 9

The ease with which consumers can take IVAs is a major worry for lenders 10

Q3 2006 figures are down on our expectations at the beginning of the year and as such, our full year forecasts have been modified 11

Datamonitor's forecasting model explained 11

Datamonitor forecasts a slightly more pessimistic outlook for the consumer credit market given higher unemployment and interest rates combined with poor retail sales 11

With higher interest rates, rising unemployment and poor retail sales, Datamonitor has adjusted its consumer credit forecasts slightly 13

There has been very little competitor activity in the UK's consumer credit market in Q3 14

In July 2006, HSBC launched a campaign that gave new unsecured personal loan customers a refund of 25 per cent of the interest paid, if they stayed for the full duration 14

The Retail Banking Team view 14

Cahoot stopped offering loans and credit cards to new customers in September 2006 and in December announced plans to run down its current loan book 14

The Retail Banking Team view 14

APPENDIX 16

Further reading 16

Reports and briefings 16

Ask the analyst 16

List of Tables

Table 1: Total consumer credit gross advances and balances outstanding per quarter, Q1 2004 to Q3 2006 3

Table 2: Gross advances of consumer credit by product, Q1 2005 to Q3 2006 5

Table 3: Consumer credit and car finance gross advances by product line, Q3 2005, Q3 2006 7

Table 4: Number of bankruptcies and IVAs in Wales and England, 2001-2005 10

Table 5: Updated macroeconomic variables for 2005-2007f: neutral scenario 12

Table 6: Updated consumer credit forecast by product line, 2005-2010f 13

List of Figures

Figure 1: New lending in the consumer credit market declined in Q3 2006, Q1 2004 to Q3 2006 3

Figure 2: Credit card and personal loan gross advances have been declining, Q1 2005-Q3 2006 4

Figure 3: Most product lines experienced a contraction in new lending between Q3 2006 and Q3 2005, albeit this decline was in line with our expectations at the beginning of the year, Q3 2005 to Q3 2006 6

Figure 4: Following on from an exceptionally strong market in 2003, the UK retail new car market has been in decline for two years, Q1-03 to Q3-06 8

Figure 5: Bankruptcies and IVAs have accelerated in 2005, 2001-2005 10

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