As the US credit card market passes the $1 trillion market again, a post-recession high, other markets are tempering off. Mercator Advisory Group has been ringing the “watch your credit quality” bell for six months now. Delinquencies look fine now, but don’t forget what happens when the metrics turn. Is the UK ahead of us on the curve now?• The availability of consumer credit tightened for the first time in six years during the first three months of 2017, the Bank of England said.
• High street banks and building societies told the BoE that the flow of unsecured credit is likely to slow further over the coming year and at a faster rate during the second quarter.
• Banks said they applied “tighter credit scoring criteria” for credit card applications and unsecured personal loans in the first quarter. It is not evident if the move is in anticipation of a changing credit environment or hedging bets prior to realizing the impact of Brexit. London is historically a leading financial capital. What comes after they leave the European Union remains to be seen. Either way, the task of credit management is a serious one and can’t wait for the next implosion.• The Financial Conduct Authority also warned last week that credit card lenders would have to do more for borrowers who get into trouble.
• While some economists worry that households are borrowing too much others point out that the amount of debt relative to income is far below the pre-crisis levels. The takeaway here is that the reduction in credit we see in London should make underwriters look at their standards; they might not need changes today, but the winds are blowing towards more conservative standards.
Overview by Brian Riley
, Director, Credit Advisory Service at Mercator Advisory Group
Read the full story here