One of the most important financial decisions you can make is whether to take out a loan. Loans can provide much-needed funds for major purchases, consolidate debt, or cover unexpected expenses. When it comes to borrowing money, there are a lot of options available. Card lending can be a convenient option because it can be used for almost anything. However, it is important to be mindful of the interest rate because it can add up quickly if the balance is not paid off each month.
So, here it is. We said it, they said it, and it is now happening.
The UK tightens up consumer credit, and card lending, as regulators identify a shifting market. Anyone in Washington listening?
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Britain’s consumer borrowing boom may be about to hit a wall.
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According to a Bank of England survey published Thursday, lenders are starting to see an increase in defaults and have tightened the criteria they set for borrowers.
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The change comes in the wake of multiple warnings from regulators that the pace of borrowing, with credit growth still running close to 10 percent a year, poses a risk to financial stability.
Growth is exciting but as the US market toils with credit bureau breach risks yet to be identified, plus deteriorating card portfolios, it probably makes sense to tap on the brakes a little so portfolio risk can settle. Plus, with quarterly results coming up next week, conservatism is probably in order since US issuers will likely show deterioration in credit quality.
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“Motivations for this included concerns about customer indebtedness and the squeeze in real incomes,” the BOE said in the survey.
The US credit model still works well but the more conservative UK position at least warrants a look by lenders… before the regulators get there.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
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