UK Consumer Credit Market Outlook: Q2 2007 (Market Focus)

Table of Contents

• DATAMONITOR VIEW
  • CATALYST
  • SUMMARY
• ANALYSIS
  • The UK consumer credit market experienced another tough quarter in Q2 2007
    • The consumer credit market contracted in Q2 2007
    • Most product lines continued to struggle in the second quarter of 2007
  • Higher interest rates and tighter lending criteria continued to affect the market in Q2 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 for the rest of 2007
    • Datamonitor' s forecasting model explained
    • Datamonitor envisages a slightly better outlook for the rest of 2007, combined with high interest rates
    • Lending will be affected in the short term as a result of the global credit crunch
      • Lenders will raise their prices
      • Lenders will implement stricter criteria and reduce exposure to sub-prime and non-standard sectors
      • Datamonitor' s forecasts have been affected primarily by the poor performance of credit cards and loans
      • Datamonitor has analyzed two additional alternative scenarios
  • RBS won the battle to acquire ABN Amro and the FSA' s latest PPI review was published
    • The RBS consortium' s victory in its acquisition of ABN Amro will not affect RBS' s UK division
      • It is possible, however, that Barclays will now become an acquisition target
    • The investigations into PPI continue to be of concern to lenders
      • The OFT referred PPI to the Competition Commission in 2006
      • The FSA has been investigating the sale of PPI since 2005 and released its third review in September
• APPENDIX
  • Supplementary data
    • 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
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • List of Tables
    • Table 1: Quarterly total consumer credit gross advances and balances outstanding, Q2 2005-Q2 2007
    • Table 2: Consumer credit gross advances by product, Q2 2005-Q2 2007 (£m)
    • Table 3: Datamonitor' s updated macroeconomic variables for 2006-11: Neutral Scenario
    • Table 4: Datamonitor' s updated neutral consumer credit forecast by product line, 2006-11 (gross advances, £bn)
    • Table 5: Datamonitor' s updated Pessimistic consumer credit forecast by product line, 2006-11 (gross advances, £bn)
    • Table 6: Datamonitor' s updated Optimistic consumer credit forecast by product line, 2006-11 (gross advances, £bn)
    • Table 7: Consumer credit gross advances by product, 2002-06 (£m)
    • Table 8: Datamonitor' s updated macroeconomic variables for 2006-11: Pessimistic Scenario
    • Table 9: Datamonitor' s updated macroeconomic variables for 2006-11: Optimistic Scenario
  • List of Figures
    • Figure 1: The UK consumer credit market continued to slow in Q2 2007
    • Figure 2: Most UK consumer credit products continued to struggle in Q2 2007