UK Consumer Credit Outlook: Q1 2007 (Market Focus)

Table of Contents

• DATAMONITOR VIEW
  • CATALYST
  • SUMMARY
• ANALYSIS
  • Q1 2007 data shows that the UK consumer credit market continues to struggle
    • Following a poor performance in 2006, the consumer credit market continued to underperform in Q1 2007
    • Most product lines continued to struggle in the first quarter of 2007
  • Higher interest rates and tight lending criteria adversely impacted on the market in Q1 2007
    • The base rate was increased further in 2007 to curb Inflationary pressures
      • High household debt and higher costs of borrowing have slowed the market
    • Lenders remain conservative with regards to lending criteria
  • Datamonitor forecasts a difficult market ahead, particularly in 2007
    • Datamonitor' s forecasting model explained
    • Datamonitor' s macroeconomic forecasts have remained broadly stable
    • Under a marginally improved economic view, Datamonitor has adjusted its consumer credit forecasts slightly
      • Datamonitor has analyzed two additional alternative scenarios
  • A number of competitor and regulatory activities took place in Q1 2007
    • Citigroup has acquired Egg, but it is a risky move considering the bank' s losses in recent years
    • Lloyds TSB and Barclaycard introduced fees for dormant credit card accounts
      • Such fees will become more common as lenders look to reduce costs from unprofitable customers
    • The Competition Commission published its final report on the current account market in Northern Ireland
      • In its investigation, the CC found a number of significant issues with overdrafts
      • The CC' s proposed remedies are likely to reduce lenders' income from overdrafts
• APPENDIX
  • Supplementary data
  • Definitions
    • Bank of England base rate
    • Balances outstanding
    • CAGR
    • CCJ
    • Consumer credit
    • Gross advances
    • IVAs (Individual Voluntary Arrangements)
    • OFT
    • Overdraft
  • Methodology
  • Forecasting methodology
    • Choice of economic variables
    • Model outputs
    • Bespoke scenario based forecasting
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • List of Tables
    • Table 1: Quarterly total consumer credit gross advances and balances outstanding, Q1 2004-Q1 2007
    • Table 2: Consumer credit gross advances by product, Q1 2005-Q1 2007
    • Table 3: Datamonitor' s updated macroeconomic variables for 2006-2011f: neutral scenario
    • Table 4: Datamonitor' s updated neutral consumer credit forecast by product line, 2006-2011f
    • Table 5: Datamonitor' s updated pessimistic consumer credit forecast by product line, 2006-2011f
    • Table 6: Datamonitor' s updated optimistic consumer credit forecast by product line, 2006-2011f
    • Table 7: Consumer credit gross advances year-on-year growth by product line, Q1 2005-Q1 2007
    • Table 8: Quarterly new car registrations and year-on-year growth, Q1 2003-Q1 2007
    • Table 9: Datamonitor' s updated macroeconomic variables for 2006-2011f: pessimistic scenario
    • Table 10: Datamonitor' s updated macroeconomic variables for 2006-2011f: optimistic scenario
  • List of Figures
    • Figure 1: Total consumer credit new lending continued its decline in Q1 2007, Q1 2004-Q1 2007
    • Figure 2: Except for overdrafts, most product lines continued to struggle in Q1 2007, Q1 2005-Q1 2007
    • Figure 3: The new car sales market improved in Q1 2007, Q1 2003-Q1 2007