UK Lenders to Reject More

A report released by Datamonitor this week reveals that British households are having more difficulty coping with their financial commitments, and forecasts that the number of people in the UK systematically denied credit by mainstream lenders will increase from 9.1m in 2005 to 9.4m by 2010.

Mainstream lenders can systematically reject 'non-standard individuals' for a number of reasons, including County Court Judgments (CCJs), unemployment, a personal bankruptcy record or reliance on income support, among others. The 'non-standard' population has been declining for a number of years now, due to a strong economic climate and mainstream lenders relaxing their lending criteria, but this is changing. 'The UK economy has now turned a corner' according to Maya Imberg, Financial Services Analyst at Datamonitor, 'and for the first time since the trough of the last recession, there are various indications that households are having more difficulty coping with their financial situation.'

Economic growth in 2005 was more subdued than in the previous years as consumer borrowing and consumption slowed, and unemployment rose steadily. Indeed, 2005 saw the majority of bad debt indicators change direction:

Mortgage arrears rose for the first time since 1992. According to data from the Council of Mortgage Lenders (CML), at the end of 2005, repossessions totalled 10,250 and mortgage arrears had risen to 105,990.
• The number of County Court Judgements (CCJs) rose for the first time since 1991. Figures from the Registry Trust show that there were 573,231 CCJs registered in 2005 - an increase of 34,938 on the previous year's levels.
• According to the Department of Trade and Industry, personal bankruptcies hit a record high in 2005, with their number rising by 29.2%.

Such a change points to bigger opportunities for non-standard specialist lenders, as they will have a greater pool of customers to target.

While it is important to remain aware of the fact that bad debt indicators remain, for the time being, at very low levels, they nevertheless point to consumers struggling in an economic climate that is now tougher than in previous years.

Moreover, mainstream lenders are tightening their lending criteria as a large number saw their bad debts increase substantially over 2005. This will also cause the number of individuals rejected by mainstream lenders to increase.

The company is online at www.datamonitor.com .

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.

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