UK Consumer Credit Outlook: Q1 2007 (Market Focus)

The poor performance of the UK consumer credit market in 2005 and 2006 continued into Q1 2007, as the market continued to be affected by a weaker labor market, high household debt and low consumer confidence. What can lenders expect over the next few years?



Report Highlights
The poor performance of the consumer credit market in 2005 and 2006 carried into Q1 2007, as consumers continued to be affected by a weaker labor market, high household debt and low consumer confidence.

High household debt and higher interest rates have slowed down spending, along with lenders maintaining their tightened lending criteria.

Datamonitor's forecasts for the UK consumer credit market have changed only very slightly from the previous quarter. Most product lines will continue to perform poorly over the next two years in particular.


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DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 3
Q1 2007 data shows that the UK consumer credit market continues to struggle 3
Following a poor performance in 2006, the consumer credit market continued to underperform in Q1 2007 3
Most product lines continued to struggle in the first quarter of 2007 6
Higher interest rates and tight lending criteria adversely impacted on the market in Q1 2007 9
The base rate was increased further in 2007 to curb Inflationary pressures 9
Lenders remain conservative with regards to lending criteria 10
Datamonitor forecasts a difficult market ahead, particularly in 2007 10
Datamonitor’s forecasting model explained 10
Datamonitor’s macroeconomic forecasts have remained broadly stable 10
Under a marginally improved economic view, Datamonitor has adjusted its consumer credit forecasts slightly 11
A number of competitor and regulatory activities took place in Q1 2007 14
Citigroup has acquired Egg, but it is a risky move considering the bank’s losses in recent years 14
Lloyds TSB and Barclaycard introduced fees for dormant credit card accounts 14
The Competition Commission published its final report on the current account market in Northern Ireland 15
APPENDIX 17
Supplementary data 17
Definitions 19
Bank of England base rate 19
Balances outstanding 19
CAGR 19
CCJ 19
Consumer credit 19
Gross advances 19
IVAs (Individual Voluntary Arrangements) 20
OFT 20
Overdraft 20
Methodology 20
Forecasting methodology 20
Choice of economic variables 20
Model outputs 21
Bespoke scenario based forecasting 21
Further reading 21
Ask the analyst 21
Datamonitor consulting 21
Disclaimer 21

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