Part A: UK Consumer Credit

Chart A.19 Consumer credit has been growing much faster than household incomes Annual growth rates of consumer credit products and household income Sources: Bank of England, ONS and Bank calculations. Identified dealership car finance lending by UK monetary financial institutions (MFIs) and other lenders. Sterling net lending by UK MFIs and other lenders to UK individuals (excluding student loans). Non seasonally adjusted. Percentage change on a year earlier of quarterly nominal disposable household income. Seasonally adjusted. Other is estimated as total consumer credit lending minus dealership car finance and credit card lending.

Chart A.20 Interest rates on new personal loans have been falling relative to risk-free rates Spread between effective interest rates on new personal loans and Bank Rate(a)(b) Sources: Bank of England and Bank calculations. The Bank’s effective interest rate series are currently compiled using data from up to 19 UK MFIs. Data are non seasonally adjusted. Effective rates are sterling-only monthly averages. Income from cross-selling of payment protection insurance (PPI) substantially offset low margins on personal loans during this period. For more details see www.bankofengland.co.uk/publications/Documents/quarterlybulletin/qb100301.pdf.

Chart A.21 Credit card lenders are offering longer interest-free periods Interest-free periods of credit card balance transfer offers(a) Sources: Moneyfacts and Bank calculations. Whole market end-month data, excluding values of zero and nil returns. The maximum 0% balance transfer term available across all lenders. The average 0% balance transfer term is the average of the maximum 0% balance transfer term available for each lender.

Chart A.22 Average consumer credit risk weights have fallen since 2014 Major UK banks’ average risk weights on consumer credit exposures(a) Source: Bank of England. Risk-weighted assets include both IRB and standardised exposures and are measured as a percentage of drawn balances for end-year periods 2014 to 2016.

Chart A.23 The stock of consumer credit turns over quickly End-2016 mortgage and personal loan portfolios of major UK banks, by year of issuance(a)(b)(c) Source: Bank of England. Personal loan calculations have been made using vintaged data. Peer group for personal loan data is made up of the major UK banks, representing around 75% of the total UK market. Peer group for mortgage data represents around 74% of the total UK market, and includes the major UK banks.

Chart A.24 Consumer credit losses are far higher than for mortgages UK banks’ sterling write-offs on lending to individuals(a) Sources: Bank of England and Bank calculations. Write-offs of sterling lending by UK MFIs to UK individuals. Write-offs are net of recoveries. Non seasonally adjusted. Consumer credit consists of credit card lending and other unsecured lending (other loans and advances) and excludes student loans. Lending secured on dwellings.

Chart A.25 Consumer credit losses are highly correlated with changes in unemployment Historical relationship between changes in unemployment and write-offs on non-credit card consumer credit exposures Sources: Bank of England, ONS and Bank calculations. Write-offs by UK MFIs on all currency other unsecured loans to UK individuals, expressed in sterling. Write-offs are net of recoveries. Non seasonally adjusted. These series are calculated as annualised quarterly write-offs divided by the corresponding loans outstanding at the end of the previous quarter. These data are presented as annual series using four-quarter averages.

Chart A Composition of the stock of consumer credit, end-March 2017(a)(b)(c) Sources: Bank of England, Finance & Leasing Association, published accounts and Bank calculations. Banks include monetary financial institutions (MFIs) and, where identified, non-bank subsidiaries of UK MFIs. Excludes income-contingent student loans. Numbers may not sum to totals because of rounding.

Chart B Value of annual dealership car finance for new car purchases, and proportion of private new car purchases funded with dealership car finance Sources: Finance & Leasing Association, Society of Motor Manufacturers and Traders (SMMT) and Bank calculations. Annual sterling gross lending to individuals on dealership car finance for new car purchases provided by Finance & Leasing Association members, attributed to personal contract purchase (PCP). Annual transactions on dealership car finance for new car purchases provided by Finance & Leasing Association members, as a proportion of SMMT new car registrations.