Follow Us on Facebook Follow Us on Twitter Follow Us on Google+ Follow Us on Pinterest Follow Us on Tumblr Visit our YouTube Channel Subscribe to our Feed Subscribe via FriendFeed

Connect With Us

UK Consumer Confidence Waivers

by Jim ONeil on July 3, 2012

in Personal Finance News

The level of UK consumer confidence is currently reflecting the ongoing struggles of the UK economy. According to data recently published by the Finance & Leasing Association (FLA), the consumer credit industry improved slightly during first quarter 2012. The figures indicate that total consumer finance granted by members of the FLA  was nine percent higher in March 2012 compared to March 2011. However, things changed drastically in April, when consumer confidence plummeted.

During this past March and for the first quarter as a whole, store installment credit, car finance, second mortgages, personal loans, and credit cards experienced an increase from the previous periods in 2011. Car finance experienced the largest increase, rising 20 percent from first quarter 2011 and 22 percent when comparing March 2012 to March 2011.

FLA consumer finance head Fiona Hoyle noted that the slight increase in multiple markets suggested that consumer confidence could be returning. However, she also noted that UK consumers are still cautious. She warned the government to be careful not to limit the amount of “affordable, responsibly-provided credit” through the changes it is proposing to consumer credit regulations. Personal loans and credit cards are particular areas of concern, as this combined market experienced the least growth during March and first quarter 2012, from a year-over-year perspective.

The Nationwide Index of UK consumer confidence rose from a low of 38 in October to 53 in March, causing winter retail sales to improve in the UK. In April, the index declined to 44. The British Retail Consortium like-for-like sales measure for April mirrored this trend, declining 3.3 percent from April 2011. This indicates that the previous improvement in retail sales may be short-lived.

The general UK consumer market outlook is once again bleak. Increasing prices continue to exert pressure and the employment sector is still experiencing weak pay growth. Average weekly earnings in February were just 1.1 percent higher year-over-year, while the CPI inflation rate was 3.5 percent. Germany and several other European countries are experiencing a similar situation, making things unpleasant throughout much of Europe.

The increasing difficulty that many consumers are having with getting loans bank provided is driving them to no credit check loans and other more expensive financing. Payday lenders are reaping the benefits of this gap in credit availability. Though their loans APR are much higher than banks, consumers in need of fast cash are flocking to them. These borrowers figure if they cannot get the loans cheapest on the market, they will at least get some type of financing for the short-term. Many make haste to repay the money in order to keep their total interest payment low.

Payday loans are intended to consolidate debt and cover unexpected bills, not to be used as long-term financing. Consumers who take no more than they can afford to repay quickly avoid accumulating loans debt. Until the UK economy improves and lenders relax their standards, payday loans are expected to become more popular with consumers in various earnings brackets because they are easy and convenient to use.

Comments on this entry are closed.

Previous post:

Next post: