Following a muted performance in 2005, the consumer credit market delivered a worse performance in 2006. Indeed, after more than a decade of strong growth, the consumer credit market has now slowed. Moreover, the majority of individual product lines performed badly over the year. So whats in store for the consumer credit market over the next five years?

Scope of this title:
Covers unsecured personal loans, credit cards, overdrafts, motor finance and retail finance in the UK. Provides forecasts under 3 different scenarios for the consumer credit market as a whole as well as for individual product lines Examines the factors that have impacted on the consumer credit market over the course of 2006, as well as the previous four years.

Highlights of this title:
Constrained by various factors such as a weaker labor market, increasing consumer debts and low consumer confidence, gross lending amounted to £207.8 billion at the end of December 2006, representing a contraction of 4.5 per cent on the 2005 level (£217.5 billion). Unsecured personal loans and credit cards remain the dominant products in the consumer credit market in terms of balances outstanding. However, credit cards lost share over 2006 as a result of its poor performance and its share now stands at 26.2 per cent, while personal loans continued to gain market share, standing now at 56.6 per cent. Though the consumer credit market suffered over 2006, it has nevertheless seen significant growth over the last decade. Yet motor and retail finance have been exceptions to the rule, with both product lines slowly losing market share to direct lending. Indeed, over the last few years a number of leading financiers have exited the POS market.

Topics Covered

* The consumer credit market delivered a poor performance in 2006
* Advances dropped once again, though balances grew by a small degree
* A number of factors can be attributed to the consumer credit markets poor performance
* Despite a well performing UK economy in 2006, the consumer credit market did not follow suit
* Successive base rate rises had a slowing effect on borrowing over 2006
* Despite full employment, unemployment increased slightly over 2006, contributing to the consumer credit markets contraction
* Though the housing market outperformed expectations in 2006, the consumer credit market still faltered
* Further analysis highlighted that most individual product lines performed badly over 2006
* In terms of balances outstanding, most products contracted except for retail finance and personal loans
* Fluctuations in the share of the total consumer credit market show personal loans to have gained significantly
* In terms of gross advances, all consumer credit products contracted except for overdrafts
* Fluctuations in performance saw credit cards and overdrafts gain more share of the total consumer credit market
* Meanwhile, point of sale finance continued to struggle
* Motor finance had another poor year in 2006
* Retail finance also had another poor year in 2006
* Whats next for the consumer credit market?
* Our forecasting model assesses the relationship of macroeconomic factors with respect to consumer credit products
* Under the neutral view, new lending in the consumer credit market falls in 2007 and picks up thereafter
* The consumer credit market will reach £229.4 billion in 2011
* In terms of individual product lines, virtually all products will suffer in 2007 but will pick up thereafter
* Under a pessimistic view of the economy, the consumer credit market will contract significantly in 2007 before picking up again in 2008
* The consumer credit market will dip to a low of £199.8 billion in 2007 under a pessimistic scenario
* In terms of individual product lines, retail and motor finance both continue their decline, with overdrafts performing best of all
* Under an optimistic view of the economy, the consumer credit market will begin prospering again
* The consumer credit market will expand at an annual average rate of 3.0 per cent to reach £238.1 billion in 2011
* In terms of individual product lines, retail finance will be the only underperforming product