"UK household demand for credit card borrowing plunges at record pace amid Brexit uncertainty"

[regprentice]

1 hour ago, Ah-so said:

Am I the only one that doesn't understand the Y axis or the only one that understands that he doesn't understand the Y axis?

I've read the original article and i'm still quite confused.

I think they are presenting the movement in the overall facilities granted in each quarter, not the actual debt taken. So if i have a credit limit of my card then i've a facility of 10K, even if all i have on my bill is £10. people tend not to just find 10K under their sofa and pay off their credit card bill, they chip away at them over time, or try and convert them to longer term debt such as loans or a remortgage so repayments are reasonably 'smooth' but changes in bank lending policies reducing peoples overall facilities in a much more 'jerky' way on the graphs (Dear reg - we've noticed you haven't used your card, so we are cutting your facility from 10K to 2K), i think banks cutting back on unsecured lending is much more likely the driver than the man in the street suddenly resolving to be prudent with his debt.

I always have a 0% rate credit card to hand in case something big happens (car packs in etc) and i also have a Halifax Clarity card for spending when on holiday. I'll take the longest 0% free period going. Last time i changed 0% card i took a new card before closing the old one, and i sat in my kitchen with three cards in my hand totalling £27K in unused credit i could have drawn. Its nuts. But the flip side of that is, if i suddenly couldn't get a card with 10K 0% on it, and instead i could only get 3K, then i would 'feel ' poorer and might slowly build up cash so i could weather any sudden surprises that come about. I've never actually had to make that big 'shock' purchase in 15 years of having a 0% card.

You can make a graph show anything, but that does look like a strong precursor to the credit conditions of the last crash.

 

[ftb_fml]

3 hours ago, Riedquat said:

The debt has to be paid for at some point (well OK maybe not if you listen to some people), so it really shouldn't make more than a temporary downwards tick. Retailers grumbling about it should think about how much more they could sell if people weren't also paying interest on everything they've bought.

Of course on paper it does, however we all know how debt has snowballed over past decades in the perpetual, establishment-led push towards unending growth. Debt has been the only thing propping up our increasingly unsustainable consumption for decades.. retailers were happy to ride that wave in the good times, just as they'll have to deal with the horror when it finally hits the beach.

57 minutes ago, Ah-so said:

Whatever you think of the BOE, they are actually pretty good at presenting data in graphical forms - the Financial Stability reports are very clear. This report has come from somewhere called "Macrobond".

It may be a quarter on quarter fall, but it could also be vs the same quarter a year earlier.

Also, if the impact is compounding, the drop in the past quarter should almost nothing compared to how it grew 2014 onwards.

Fair enough - wasn't aware of the source. It's certainly murky; I think the one good take-away is that it's down to a large extent, relative to all the other numbers ?

EDIT: It appears that there's a (potentially) much more comprehensive and explanatory breakdown on the findings on the BOE's site, here

 

Quote

Credit Conditions Survey - 2018 Q4

This quarterly survey of banks and building societies is aimed at improving our understanding of trends and developments in credit conditions.

 

Published on 17 January 2019

 

The 2018 Q4 survey was conducted between 19 November and 7 December 2018.

Supply

• Lenders reported that the availability of secured credit to households had decreased in the three months to end-November 2018 (Q4) and was expected to increase slightly over the next three months to end-February 2019 (Q1).
• The availability of unsecured credit to households was reported to have decreased in Q4 and was expected to decrease slightly in Q1 (Chart 1). Credit scoring criteria for total unsecured loan applications were reported to have tightened slightly in Q4, although the proportion of applications approved was unchanged.
• The overall availability of credit to the corporate sector was reported to have been unchanged in Q4. Within this, the availability of credit provided to medium businesses was reported to have fallen slightly in Q4, and was unchanged for small and large businesses. The overall availability of credit to the corporate sector was expected to remain unchanged in Q1.

Demand

• Lenders reported that demand for secured lending for house purchase decreased significantly in Q4, and was expected to decrease further in Q1. However, demand for secured lending for remortgaging increased slightly in Q4, but demand was expected to decrease slightly in Q1 (Chart 2).
• Overall demand for unsecured lending increased significantly again in Q4; this was solely driven by a significant increase in demand for credit card lending. However, lenders expected a significant decrease in the demand for credit card lending in Q1, with demand for other unsecured lending expected to be unchanged (Chart 3).
• Lenders reported a decrease in demand for corporate lending from small businesses in Q4, and expected demand to decrease slightly in Q1 (Chart 4). For medium PNFCs, demand for lending was reported to have increased slightly but was expected to decrease in the next quarter. Demand for corporate lending from large PNFCs was reported to have decreased in Q4 and was expected to decrease significantly in 2019 Q1.

Loan pricing

• Overall spreads on secured lending to households — relative to Bank Rate or the appropriate swap rate — were reported to have narrowed significantly in 2018 Q4 and were expected to narrow further in Q1 (Chart 5).
• Lenders reported that overall unsecured lending spreads narrowed slightly in Q4. Overall unsecured lending spreads were expected to remain unchanged in Q1. The length of interest-free periods for balance transfers and new purchases on new credit card lending both decreased significantly in Q4.
• Spreads on lending to businesses of all sizes were unchanged in Q4, and were expected to remain unchanged over the next three months.

Defaults

• Lenders reported that default rates on secured loans to households was unchanged in Q4, and expected these to decrease in Q1. Losses given default on secured loans were unchanged in Q4, and were expected to increase slightly over 2019 Q1.
• Default rates increased for total unsecured lending in Q4. This was driven by an increase in default rates on credit card loans (Chart 6). Lenders expected default rates for total unsecured lending to remain unchanged in Q1.
• Lenders reported that default rates on loans to corporates increased for small businesses in Q4, and increased slightly for medium-sized businesses while remaining unchanged for large businesses. However, losses given defaults were unchanged. Default rates were expected to be unchanged for small and large businesses in Q1, but were expected to increase for medium-sized businesses.

 

Edited January 17, 2019 by ftb_fml

[24gray24]

May be unrepresentative, but I know of 2 banks that are not giving out unsecured loans. Just "not doing any for a few months / until next year." 

Struck me as odd for a bank to do that; thought it was the applicant, then it happened again (both had zero debts). 

 

[BearlyBegun]

In the last 10 days HSBC have emailed me twice, unprompted, with their marketing push - I do bank with them though:

HSBC Personal Loan at 3.3% APR representative  on amounts of £7,000 - £15,000 for 1 to 5 years   Also: The new year is a chance to start afresh, and whatever plans you have, you could make them happen with an HSBC Personal Loan.   You’re highly likely to be accepted for a loan of up to £25,000 and, because we already know you, it’s quick and easy to apply on the go. If your application is approved, the money will be in your account instantly.

I have no need for it & so havent actually tested whether they actually would give it.

[24gray24]

23 hours ago, BearlyBegun said:

In the last 10 days HSBC have emailed me twice, unprompted, with their marketing push - I do bank with them though:

HSBC Personal Loan at 3.3% APR representative  on amounts of £7,000 - £15,000 for 1 to 5 years   Also: The new year is a chance to start afresh, and whatever plans you have, you could make them happen with an HSBC Personal Loan.   You’re highly likely to be accepted for a loan of up to £25,000 and, because we already know you, it’s quick and easy to apply on the go. If your application is approved, the money will be in your account instantly.

I have no need for it & so havent actually tested whether they actually would give it.

You've got a mortgage with them?  Equity over £15000? 

That's safe for the bank; default and they'll secure it against the house.

Effectively it looks like an offer of a loan for people who have equity to release. At 14%. 

 

[scottbeard]

On 17/01/2019 at 13:41, btd1981 said:

It can work the other way, though. What happened final quarter 2009? Seriously??

That's probably just the magic of percentages though - if something at 100 falls to 90, then 80, then 70 that's a drop of 10%, 12% and 13%.  If it then goes back to 100 again that's a rise of 43%.  That I think is what you're seeing in 2009 figures.  

[Crashley Banjo]

On 17/01/2019 at 11:05, Errol said:

The attempts to link everything to Brexit are just hilarious.

Trickeration at its best 

[dugsbody]

On 17/01/2019 at 11:42, AdamoMucci said:

The media are in on it! The media are very against Brexit except perhaps the Mail, Express, Sun who have their own agenda. The rest are all establishment neo-liberal mouth pieces.

The largest and most read papers int he country are anti-EU and pro-brexit. The anti-EU propaganda has been going on for decades by these papers.

[BearlyBegun]

On 19/01/2019 at 11:55, 24gray24 said:

You've got a mortgage with them?  Equity over £15000? 

That's safe for the bank; default and they'll secure it against the house.

Effectively it looks like an offer of a loan for people who have equity to release. At 14%. 

 

I have an ISA with them that exceeds their loan offer amount, which I guess from their side makes the offer safe for them...

I dont own a house/mortgage though.

[localhero1983]

On 1/17/2019 at 10:35 AM, ftb_fml said:

Independent / BOE.

Of course it's all Brexit's fault..

Regardless a pretty shocking decline and a trend that's only going to hammer retail spending further, with all the fallout to be expected as a result.

I find it interesting that people are apparently willfully reigning in their debt (economic pragmatism doesn't seem like a strength of the average consumer). Also, since debt seems to be the core problem around which our ruined economy revolves, a decrease in its uptake has to be encouraging. 

That has lifted me knowing the British can be sensible and live within their means if need be, or at least get closer. Anyone from the establishment suggesting this is in anyway bad news just shows them up for what they really are, parasites/pushers.

[goldbug9999]

On 17/01/2019 at 13:27, zilly said:

And, of course, if they payed their people more...

Paying people more is pointless, any extra income will just get soaked up in rents and house prices. People can only be better off if we create a supply driven rather than a demand driven housing sector. 

[ftb_fml]

54 minutes ago, localhero1983 said:

That has lifted me knowing the British can be sensible and live within their means if need be, or at least get closer. Anyone from the establishment suggesting this is in anyway bad news just shows them up for what they really are, parasites/pushers.

Unfortunately though as others have pointed out it doesn't appear to be that simple; a large part of this contraction in debt "demand" actually appearing to come from tighter lending criteria on the part of the banks.

Sadly as much as I'd like to agree with your positive outlook, I think the average brit is well down the road to debt-led-destruction.

[localhero1983]

5 minutes ago, ftb_fml said:

Unfortunately though as others have pointed out it doesn't appear to be that simple; a large part of this contraction in debt "demand" actually appearing to come from tighter lending criteria on the part of the banks.

Sadly as much as I'd like to agree with your positive outlook, I think the average brit is well down the road to debt-led-destruction.

Well I am not in debt to a penny, and I am sure I am not the only one. So whatever the average personal debt is in the UK now someone has taken my share and probably a few others,

[ftb_fml]

4 minutes ago, localhero1983 said:

Well I am not in debt to a penny, and I am sure I am not the only one. So whatever the average personal debt is in the UK now someone has taken my share and probably a few others,

Good work - was having this conversation with the Mrs. earlier. While we could always be better, at least we're not up to our eyeballs in debt flying straight into a potentially mammoth global recession - so there is that ?

[localhero1983]

1 minute ago, ftb_fml said:

Good work - was having this conversation with the Mrs. earlier. While we could always be better, at least we're not up to our eyeballs in debt flying straight into a potentially mammoth global recession - so there is that ?

Hey Ftb, if somehow you can get over that real pressure that is put on the sheep to borrow at insane levels for a rabbit hutch, and it is a real pressure for some, life is f***ing great. I earn very good money, fridge and freezer are packed,  I travel constantly and if I want something I get it cash, and most importantly I sleep every night like a baby.

The icing on the cake will come, and when it does just being debt free will be the new black

[ftb_fml]

13 hours ago, localhero1983 said:

Hey Ftb, if somehow you can get over that real pressure that is put on the sheep to borrow at insane levels for a rabbit hutch, and it is a real pressure for some, life is f***ing great. I earn very good money, fridge and freezer are packed,  I travel constantly and if I want something I get it cash, and most importantly I sleep every night like a baby.

The icing on the cake will come, and when it does just being debt free will be the new black

Thanks

I'm not quite living the dream but am certainly no sheep and know I'm in a better position than many.. although sometimes I do envy their blissful ignorance.

Anyway, roll on the correction!

[Errol]

17 hours ago, localhero1983 said:

Well I am not in debt to a penny, and I am sure I am not the only one. So whatever the average personal debt is in the UK now someone has taken my share and probably a few others,

Indeed. It means there most be loads of people who have massive quantities of debt.

[Sour Mash]

3 hours ago, Errol said:

Indeed. It means there most be loads of people who have massive quantities of debt.

The majority of people around me seem to be in perpetual debt.  When work screwed up with the wages a few years back (ie. paid ten days late one month due to an admin issue, they warned a week in advance) there was uproar from people panicking that they wouldn't be able to meet debt repayments.

Also, while I try to avoid overtime if I possibly can, most others are trying to pick up out-of-hours work to get extra cash to service debt.

[Bearly Audible]

Alternative view: when we finally get the GFC we should have had in 2008, the only tool left for TPTB will be "true" helicopter money, and some kind of debt jubilee for consumer debt might be how they do it.

So you might want to maintain some level of consumer debt purely as a hedge against bailouts for the profligate (even if you don't need it). Gotta be in it to win it, right?

[M21er]

8 minutes ago, Bearly Audible said:

Alternative view: when we finally get the GFC we should have had in 2008, the only tool left for TPTB will be "true" helicopter money, and some kind of debt jubilee for consumer debt might be how they do it.

So you might want to maintain some level of consumer debt purely as a hedge against bailouts for the profligate (even if you don't need it). Gotta be in it to win it, right?

From 2011 on this website!

 

[Assume The Opposite]

Barclays keep offering me a pre-selected loan up to £25,000 / 120 months on the app.

That amount wasn't £25,000 a while ago and now they sent me a letter with the offer.. 

 

Desperate??

[longgone]

20 hours ago, Sour Mash said:

The majority of people around me seem to be in perpetual debt.  When work screwed up with the wages a few years back (ie. paid ten days late one month due to an admin issue, they warned a week in advance) there was uproar from people panicking that they wouldn't be able to meet debt repayments.

Also, while I try to avoid overtime if I possibly can, most others are trying to pick up out-of-hours work to get extra cash to service debt.

what a nice life that sounds like disruption to payments for a short time and hell breaks lose. 

what a sad state of affairs. 

[Dorkins]

18 hours ago, Bearly Audible said:

Alternative view: when we finally get the GFC we should have had in 2008, the only tool left for TPTB will be "true" helicopter money, and some kind of debt jubilee for consumer debt might be how they do it.

So you might want to maintain some level of consumer debt purely as a hedge against bailouts for the profligate (even if you don't need it). Gotta be in it to win it, right?

It would be electoral suicide for a government to only give helicopter money to the indebted as people would be angry about the blatant unfairness. If helicopter money comes it will be given to everybody.

[Voice of Doom]

I think so, too. This is what Steve Keen advocates with his idea of a debt jubilee.

[Voice of Doom]

Going back to the original post, I still have to pinch myself that we are discussing these things (huge and increasing private debt) only a few years after the '08 crash. Has there ever been a time when the lessons of history have been ignored so soon?