FLA Reveal Loan Market Contraction

Mon, 29 Jun 2009

New figures from the Finance and Leasing Association (FLA) have indicated that the consumer credit market may be shrinking, meaning there will be a limited number of loans available to consumers. The figures revealed an 83 per cent fall contraction of the secured loan market between April 2008 and April 2009, whilst the unsecured loan market shrank by 45 per cent over the same period. In total, consumer lending by FLA members was down by almost 20 per cent.

The figures are concerning for a number of reasons. Firstly, they may result in a rise in the number of repossessions as consumers are unable to secure personal loans or mortgages, following an increase in the number of home order sale applications by lenders who have seen borrowers default on unsecured personal loans . Secondly, the lack of availability of credit may result in borrowers turning to unregulated lenders in a bid to keep up with debt repayments.

Head of Research and Chief Economist at the FLA, Geraldine Kilkelly, commented that the figures demonstrated the continued pressure on the consumer credit sector. Mrs Kilkelly called for the government to take action to increase the availability of credit, after numerous interest rate reductions from the Bank of England failed to entice a more generous approach from banks .
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