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Creditfix LB 03-2017

Bank of England Concerned Over Consumer Credit

Serious concerns have been voiced by the Bank of England over escalating levels of consumer in the UK.

Consumer borrowing among British households was shown to be growing at the fastest pace in eleven years in November, and that is believed to have continued over Christmas.

Bank data has shown consumer credit growing at around 10 per cent for months now, and executive director for financial stability, Alex Brazier has suggested that the growth is ‘a very difficult number to ignore’ and the bank may have to consider intervening.

Currently the Bank of England financial policy committee has no powers to intervene on consumer credit, unlike mortgages. However, some MPs on the Treasury Select Committee have asked Mark Carney if he feels that the Bank of England should ask for the powers required.

‘What we as a [financial policy] committee will have to think about, and it is a big call, is whether there is anything that should be done, above and beyond making sure the core of the system is resilient to this,’ Mr Carney said. ‘It is a big step to go beyond that.’

Mr Carney also added that the Prudential Regulation Authority, who have previously ordered mortgage providers to toughen up affordability checks, could also force lenders to reign in their consumer lending. ‘We don’t have to have the direct power,’ he said.

Mr Brazier believes that the loosening of credit conditions by lenders is becoming a concern, and cited the increase in consumer credit broadened out to personal loans and credit cards amidst a doubling of interest-free introductory periods on credit cards as an example of slackening underwriting standards.

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