Consumers face credit squeeze as lenders tighten loan availability – business live

All the day’s economic and financial news, as British banks plan to tighten unsecured credit and chartered surveyors warn that Britain’s housing market is cooling

This means that it is too early to begin discussions over Britain’s future relationship with the European Union, Barnier warned.

David Davis, secretary of state for leaving the EU, argued that talks have ‘come a long way’. Barnier agreed that ‘decisive’ progress could be made before Christmas.

The pound also shed more than half a cent against the US dollar, to $1.315.

Andy Sparrow’s Politics Live blog has full details:

Not so long ago they were lending left, right and centre at tantalising rates, and now they are turning the taps off with similar enthusiasm.

For consumers, money being as cheap as it has been is a double-edged sword. Initially, it enables people to keep their heads above water but then the rates on offer can encourage households to take on more than they can manage.

That’s a sign that households are struggling as inflation outpaces wage growth.

Default rates on credit card lending were reported to have increased slightly in Q3, while those on other unsecured lending increased significantly. A further slight increase was expected for credit card lending only in Q4.

Losses given default were reported to have increased slightly on credit card lending while remaining unchanged on other unsecured lending. Both were expected to be unchanged in Q4.

Any tightening of consumer credit is likely to hit spending, and thus economic growth, warns Sam Tombs of Pantheon Economics:

This chart confirms that UK lenders are putting a squeeze on consumer credit:

Lenders reported that the availability of unsecured credit to households decreased in Q3 and expected a significant decrease in Q4.

Credit scoring criteria for granting both credit card and other unsecured loans were reported to have tightened again in Q3, while the proportion of unsecured credit applications being approved fell significantly.

That means that many more lenders expect to tighten lending rather than expand it.

Lenders also reported that they tightened credit over the summer, as this chart shows (see the second line).

And last month, the Guardian ran an investigation into how the UK’s debts have risen sharply, and how it could create a new crisis.

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It’s surged by 7% this morning, hitting $5,180 as traders send the cryptocurrency skyward.

Bitcoin’s meteoric rise (and occasional stumbles) have divided financial experts. Some traders believe it could be a new safe-haven in times of political and economic strife. Others, such as JP Morgan’s Jamie Dimon, claim that it’s a fraud, and a bubble that will blow up eventually.

Buyers are cautious, Brexit and a government with little apparent direction are major factors that especially affect London sales, media predictions of values dropping erodes confidence in buyers.

The market remained soft throughout the summer period and buyers are concerned that prices are now in decline.

Prices across prime London continue to soften, perhaps down 1 to 2 % over the last 3 months. Price falls have been greatest in central London at the top end of the market, probably back close to 2012 levels.

RICS also predicts that UK rents will rise by around 2% over the next year, but they’ll probably fall in London:

Britain’s housing market is stalling as worries that interest rates could rise soon spook buyers.

Sales and inquiries from potential purchasers both fell “noticeably” in September, and see little evidence that the market will pick up soon.

That’s according to Britain’s chartered surveyors, who have given a rather downbeat assessment of the sector.

They report that price gauge for London remains “firmly negative”, and there are also signs that prices are cooling in the South East too, with talk that houses are simply over-priced.

The UK housing market continues to lack momentum in September, as demand from new buyers and sales fall again and the shift in interest rate expectations contributes to buyer caution in a slowing market,

However, Wales, the North West of England, Scotland and Northern Ireland all saw prices rise in September - reflecting regional disparities in the housing market.

The headline indicators on demand and sales both slipped deeper into negative territory, with this subdued picture anticipated to persist over the coming months.

Feedback from contributors suggests the recent shift in interest rate expectations may be contributing to the more cautious tone in market sentiment.

At the twelve month horizon, respondents do expect prices to increase in all areas, with London the sole exception. In the capital, twelve month expectations are now more downbeat than at any other point since this series was introduced in 2010.

This chart shows how prices in London are now lagging behind the rest of the country, having boomed earlier this decade:

It looks like another sign that the UK economy is cooling.

The UK government is outlining plans for a ‘temporary’ energy price cap, as it tries to deliver on Theresa May’s pledge to end “rip-off” bills.

European markets are expected to open little-changed on last night’s close, after the US markets hit another record high.

We’ll also keep an eye on Washington, where the International Monetary Fund and the World Bank are holding their Annual Meeting.

 

October 12, 2017

Sources:` Daily Mail ; The Guardian

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