First of all let us start by wishing everyone a Merry Christmas and a great New Year.
It’s our first day back today and we thought we would dig out our stats for the run up to the Christmas. We have read some articles in major newspapers about lending being higher this year and we wanted to see if we could confirm that, as it does give a great insight into the state of the economy. What we found basically indicated that they were indeed right.
Data December 2014 Data December 2015 Change
30,230 Loan Applications 38,147 +26.1%
3486 Loans granted 3865 +10.8%
£2,311,218 £2,701,635 +6.8%
Now as we haven’t finished December yet, we've made projections for the last 3 days to give data equal to the full month for December 2015.
As you can see from the data there is an increase across the board in loans being applied for, loans granted and the average loan amount.
What does it show?
In our opinion it shows that people are still comfortable to fund non essential items using credit. Rather than cut back spending on gifts and other luxuries, people prefer instead to spread the payments across a longer period of time. If we are wrong, it actually shows that people are struggling more than even we think. People borrowing to heat their homes and to eat.
Not many people know, but lenders actually start to withdraw products in the run up to Christmas because they don't want fund people borrowing irresponsibly and defaulting in January.
Is this a good thing?
Despite what the treasury says and how they claim to want an economy not built on credit, they are desperate for spending to continue in whatever way it can. Whilst condemning consumer borrowing on one hand, they are happy for it to continue because they know that if it stops – there may be bigger trouble ahead.
This is borne out by recently disclosed Freedom of Information documents showing the Treasury giving instructions to the FCA not to stop or slow consumer credit.
Where does it go from here?
We are unsure; we did expect lending to go down this year, not up! With all the price caps and lenders withdrawing from the market, we thought that applications would be up but the actually loans being granted would have gone down. That doesn't appear to be the case.
We guess that we will see more within the next three months as the default data starts to come in for those people who have fallen behind with their repayments. It will start to complete the picture on whether or not lending is sustainable, people are lending responsibly or not.