U.K. consumer credit market could see decline in borrowing through 2016

Though the U.K. consumer credit market has enjoyed uninterrupted growth within the past 10 years, borrowing has fallen by more than $800 per household within the last year.

As consumers attempt to repay their debts and the flow of credit remains constrained, retail markets may see a decline in sales, Companies and Markets reports.

Total unsecured gross lending is expected to rise by $288 billion in 2011 to $368 billion in 2016, reflecting a 4.6 percent annual growth rate. Unsecured personal lending is expected to outperform other categories, doubling from $43 billion in 2011 to $90 billion in 2016. Auto loans are also expected to grow and manufacturers are expected to use the growth to stimulate consumer demand.

Credit card lending has also been on the decline, but other gross lending categories of consumer credit reported growth in the past year even as consumers face an increasing cost of living, stagnant wages and rising unemployment, according to Companies and Markets.

Some consumers are forced to rely on credit borrowing to maintain their everyday lives, and, as a result, personal lending saw increased growth of four percent in 2012. Personal loans represent about 87 percent of personal lending, followed by overdraft fees, though payday loans are the fastest growing category.

Consumers will likely reduce credit use or keep it at a minimum up through 2016 as they attempt to pay off old debt and avoid new debt.

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