Financial Facts reports a 2010 International Monetary Fund Predicted a 2.4% Rise in Consumer Debt in the UK

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Consumers return to heavy lending as recession abates. IMF expects 2.4& rise in consumer loans in 2010. Demand for loans set to outpace supply by £150 billion. Britain ranks lowest in Europe, says report

Great care in disengaging from public support will be necessary to avoid either sparking a secondary crisis through premature withdrawal, or endangering monetary and fiscal credibility through a belated exit

Credit constrains are most susceptible in the UK

The Financial Facts report anticipated demand for loans to outpace supply by £280 billion in 2009 and by £150 billion in 2010, a shortfall equivalent to 15% of UK GDP compared to 3% the eurozone and 2.4% in America.

The IMF added that by the end of 2010 Britain will rank highest in Europe for defaults in the four years from 2007 to 2010.

"In terms of regional vulnerability, the United Kingdom appears most susceptible to credit constraints...given its significant reliance on the banking channel and the projected sharp decline in domestic bank balance sheets, as well as substantial public financing needs," the report said.

Credit crunch quickly forgotten

The ongoing credit crunch meant 2009 will see a 1.5% drop in consumer loans in the UK, but the IMF report expects a 2.4% rise in 2010.

Financial Facts points out that while consumers react to news that the crisis is over, the IMF report insisted that it was too early to claim a corner had been turned.

As the demand for credit spikes once again, Financial Facts urges consumers to practice responsible lending protocols.

Reliable advice is available from MBNA's recently launched 'credit sense' facility, which offers guidance on managing credit and tackling debt. MBNA also offer advice for those looking for business credit cards

Credit could hamper Britain's economic recovery

The IMF report warned that sharp rises in landing could hamstring the UK's economic recovery and even cause a second crisis.

"Great care in disengaging from public support will be necessary to avoid either sparking a secondary crisis through premature withdrawal, or endangering monetary and fiscal credibility through a belated exit," the report said.

Financial Facts sees banks as being stuck between a rock and a hard place - they are being urged to reduce their lending to rebuild overstretched balance sheets a while being encouraged to continue lending to boost the economy.

UK lenders overly generous with credit limits

Financial Facts sees part of the problem as overzealous lending by UK credit card providers, particularly with regard to credit limits.

Financial Facts finds vast discrepancies between credit limits offered in the UK compared with the eurozone A customer with a UK card may be offered as little as one fifth that figure a Spanish or German bank on the same income.

A respondent to an article covering the IMF report in the Daily Mail said his income in the UK gave him a credit limit on my main card of £10,000. That same income in Spain gave him a limit of £500 and in Germany approximately £1000.

References
http://www.financialfacts.org
http://www.mbna.co.uk/help-centre/credit-sense/index.html

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