March 2024 has seen a 4% drop in new consumer finance business compared to the same month last year, according to the latest figures from the Finance & Leasing Association (FLA). This decrease reflects a broader trend of caution in consumer spending, even as other economic indicators show signs of recovery.

Sector-Specific Insights

The credit card and personal loans sectors experienced a slight reduction, with new business falling by 3% from March 2023. More pronounced was the decline in the retail store and online credit sector, which saw a significant 14% decrease in new business over the same period. This sector, in particular, seems to have felt the brunt of changing consumer habits and increased cautiousness about taking on new debt.

In contrast, some areas of consumer finance have shown surprising resilience. Notably, the market for second charge mortgages reported an increase of 11% in new business during March, and an impressive 14% growth in the first quarter of 2024. This growth indicates a continued interest in securing additional financing against property, perhaps reflecting the ongoing challenges in the housing market.

Overall Market Stability

Despite the monthly downturn, the first quarter of 2024 saw the overall level of new business in consumer finance remain stable compared to Q1 2023. Geraldine Kilkelly, Director of Research and Chief Economist at the FLA, commented on the resilience of the market. “Consumer finance new business held steady in Q1 2024, which, together with growth in household real disposable incomes, supported the recovery in consumer spending during the first quarter of the year.”

Kilkelly further noted that economic optimism is on the rise, a sentiment echoed by the FLA’s Q2 2024 Industry Outlook Survey. According to the survey, 82% of consumer finance respondents are optimistic about an improvement in economic conditions over the next 12 months, with 88% expecting an increase in the value of new business.

Analyzing the Data

Looking at the data more closely:

  • Total FLA consumer finance reported in March amounted to £10,491 million, marking a 4% decrease year-over-year.
  • Over the three months to March 2024, the total amounted to £28,175 million, showing no change from the previous year.
  • In a year-over-year comparison, the total business volume for the 12 months ending in March 2024 decreased by 2% to £112,986 million.

Specific sectors such as car finance also mirrored this downward trend, reporting a 5% decrease in March and a 3% decline over the first quarter.

Looking Ahead

Despite the mixed results across different sectors, the overall stability of consumer finance and positive expectations for economic conditions suggest that the market could see a return to growth in the near future. As consumer confidence potentially strengthens, fueled by improving disposable incomes and a stabilizing economic environment, sectors that have experienced declines may begin to recover.

The key challenge for the consumer finance industry will be navigating the ongoing economic uncertainties and adapting to the evolving financial needs of consumers, particularly in a landscape that may see fluctuating interest rates and consumer spending habits in the coming months.

New consumer credit lending

Mar 2024% change on prev. year3 months to Mar2024  % change on prev. year12 months to Mar2024% change on prev. year
Total FLA consumer finance (£m)10,491-428,1750112,986-2
Data extracts:
Retail store and online credit (£m)629-141,809-118,598-3
Credit cards & personal loans (£m)4,923-314,588259,523-1
Second charge mortgages (£m)13711379141,429-7
Car finance (£m)4,374-510,198-338,675-4

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Last Update: May 15, 2024