UK Consumer Credit Market Outlook: Q3 2007 (Market Focus)

DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
The consumer credit market improved slightly in Q3 2007, but lending remains weak 2
The consumer credit market continues to experience a difficult time 2
Higher interest rates and tighter lending criteria continued to affect the market in Q3 2007 6
The base rate was increased to 5.75% in July 2007 to curb inflationary pressures 6
High household debt and higher costs of borrowing have slowed the market 6
Lenders became even more conservative with regards to lending criteria as a result of the credit crunch 6
Datamonitor forecasts a difficult market through the end of 2007 and 2008 7
Datamonitor's forecasting model explained 7
Datamonitor envisages a slightly better outlook for the rest of 2007, but a less optimistic 2008 7
Datamonitor's forecasts continue to be affected by the flat credit card market and decline of unsecured personal loans 8
Datamonitor has analyzed two additional alternative scenarios 9
Northern Rock is awaiting bids, while some lenders have exited the personal loans market 11
The fall of Northern Rock has left a gap in the unsecured personal loans market 11
A number of lenders have left the personal loans market 11
On the regulatory side, consumers will benefit from changes to the Banking and Business Banking Codes 12
APPENDIX 13
Supplementary data 13
Definitions 14
Bank of England base rate 14
Balances outstanding 14
CAGR 14
CCJ 14
Consumer credit 14
Gross advances 14
OFT 14
Overdraft 14
Methodology 14
Forecasting methodology 15
Choice of economic variables 15
Model outputs 15
Bespoke scenario-based forecasting 15
Ask the analyst 15
Datamonitor consulting 16
Disclaimer 16
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Table 1: Quarterly total consumer credit gross advances and balances outstanding in the UK, Q3 2005-Q3 2007 3
Table 2: UK consumer credit gross advances by product, Q3 2005-Q3 2007 (£m) 4
Table 3: Datamonitor's updated macroeconomic variables for 2006-11: Neutral Scenario 8
Table 4: Datamonitor's updated neutral consumer credit forecast by product line, 2006-11 (£bn) 9
Table 5: Datamonitor's updated Pessimistic consumer credit forecast by product line, 2006-11 (£bn) 10
Table 6: Datamonitor's updated Optimistic consumer credit forecast by product line, 2006-11 (£bn) 11
Table 7: Datamonitor's updated macroeconomic variables for 2006-11: Pessimistic Scenario 13
Table 8: Datamonitor's updated macroeconomic variables for 2006-11: Optimistic Scenario 13


Figure 1: Total UK consumer credit new lending saw a slight reprieve in Q3 2007 2
Figure 2: Most UK consumer credit products continued to perform weakly in Q3 2007 4
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