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New consumer finance rises 12% in January

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New consumer finance business grew 12% in January, compared with the same month last year, while retail store and online credit new business increased by 13% over the same period.

The figures, released today by the Finance & Leasing Association (FLA), are likely to add fuel to calls for a rate rise in May to prevent borrowing spiking higher.

The figures come days after the UK financial regulator warned that the mid-cost segment of the consumer lending market was at risk of being ‘overwhelmed by demand’.

However, this contrasts with figures last month from UK Finance, which showed families cutting back on borrowing for the first time since mid-2013, Its figures showed personal loans and overdraft usage falling by 4.6% a year on year. Credit card borrowing rose by 4.8%, but this was the slowest increase in two and a half years.

Geraldine Kilkelly, head of research and chief economist at the FLA, said the new figures reflected confidence among households: “The performance of the consumer finance market in January reflects a resilient household sector. Despite the squeeze on real earnings from higher inflation, consumer confidence about the outlook for their own finances and spending has held up. The labour market remains robust, with record levels of employment and a pick-up in earnings growth.”

The second charge mortgage market also saw higher growth in January, with new business up 8% by value and 13% by volume compared with the same period in 2017. New business in the point of sale (POS) consumer car finance market increased 7% by volume and 13% by value in January, compared with the same month in 2017. However, new business volumes in for new cars fell by 4% compared with January 2017, while volumes for used cars rose.

Car sales are often taken as a leading indicator for the health of the economy. As such, this may suggest some caution among households for larger purchases.

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