Who’s driving consumer credit growth?

Who’s driving consumer credit growth?
Ben Guttman-Kenney, Liam Kirwin, Sagar Shah
Bank Underground, 08 JANUARY 2018




Consumer credit growth has raised concern in some quarters. This type of borrowing – which covers mainstream products such as credit cards, motor finance, personal loans and less mainstream ones such as rent-to-own agreements – has been growing at a rapid 10% a year. What’s been driving this credit growth, and how worried should policymakers be?

For many years regulators have relied on aggregated data from larger lenders to monitor which lenders and products are driving credit growth. These data are useful. But they also have important gaps. For example, they don’t include less-mainstream products that people with low incomes often rely on.

Such data do not show who is borrowing, or people’s overall debts across different lenders and products. This matters. If people borrow on many products, problems repaying one debt could rapidly spill over to others. Consumer surveys can offer some insights here. But surveys often have limited product coverage, are only available with a lag, and may suffer from misreporting.

To build a better, fuller picture of borrowing, the FCA requested credit reference agency (CRA) data for one in ten UK consumers. CRAs hold monthly data on most types of borrowing – including consumer credit, mortgages, and utilities. These data are really rich, going back six years, and can be studied at many different levels. For example, it is possible to scrutinise individual borrowing across products, or to focus on particular lenders or types of products.

We examined these data to assess possible risks from recent credit growth. This article summarises three particular insights which have emerged from this work:

  1. Credit growth has not been driven by subprime borrowers;
  2. People without mortgages have mainly driven credit growth;
  3. Consumers remain indebted for longer than product-level data implies.


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