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Consumer Credit Slows

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Source: http://uk.news.yahoo.com/rtrs/20070523/tuk...it-fa6b408.html

LONDON (Reuters) - The consumer credit market has finally slowed after more than a decade of strong growth, a report says.

Independent market analyst Datamonitor found the market experienced a poor year in 2006, with gross lending slipping 4.5 percent to 207.8 billion pounds.

As a result, the average adult's outstanding debt rose just 0.8 percent to 4,522 pounds.

Financial services analyst Maya Imberg said: "A weaker labour market, combined with high consumer debts and weakened consumer confidence meant that consumers cut down considerably on spending and aimed to repay more of their debts over 2006."

Britons have amassed a record personal debt mountain of more than a trillion pounds, after interest rates hit a 48-year low of 3.5 percent in 2003.

But the cost of borrowing has started to climb again -- and hit a six-year high earlier this month of 5.5 percent.

Personal bankruptcies have reached record levels and home repossessions are up as consumers struggle to repay.

Datamonitor said the next five years would prove difficult for lenders -- but that borrowers with good credit histories stood to benefit from cheaper deals.

It said the market would perform poorly again in 2007, as consumers remain saddled with high levels of debt in a relatively high interest rate environment.

The market is expected to stage a slow recovery from 2008, with consumer credit advances growing at an annual compounded average rate of 3.2 percent to reach 229.4 billion pounds in 2011.

Datamonitor said lenders were looking to reduce risk, with some shifting their focus to better quality lending, even at the expense of business volumes.

"Such a situation implies that customers of good quality can expect to benefit from lower interest rate offers, yet those with poor credit records will face more difficulty in accessing credit and will pay higher rates than was formerly the case," added Imberg.

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