Christmas spending prompts sharp rise in retail instalment credit
Store instalment credit rose sharply in December as savvy consumers looked to use credit sensibly to meet specific purchase needs.
Consumers spent 17% more using instalment credit in the run up to Christmas 2009 than they did in 2008, according to new figures from the Finance & Leasing Association.
It is likely that some of this rise can be attributed to the restoration of VAT rates to 17.5%, which would have caused people to bring forward spending to take advantage of the savings offered.
New consumer lending provided by FLA members overall was down by 15% in 2009 compared with 2008. The breakdown of products shows that credit card, store card and store instalment credit spending have held up, relative to longer-term credit products. Customers are using instalment credit for smaller purchases of furniture, white goods and home electronics, usually costing £700 or less.
Second-charge mortgages and personal loans have shown the largest falls – availability of funding and increased risk of customers defaulting have hampered lenders’ ability to lend. Low consumer confidence is also an issue – people do not want to take out long- term credit commitments, while so much uncertainty surrounds the economic recovery and unemployment levels remain high.
The FLA’s Head of Consumer Finance, Fiona Hoyle, commented: “Our figures tell a wider story of the recession.Overall, new consumer lending is down by 15%. But the breakdown between different credit products tells us that customers are looking at the financial products
available to them, and using credit products to meet specific needs.
“The High Street has benefited from FLA members providing credit to customers, whether through credit cards, store cards or store instalment credit.Customers are using these products because they are flexible and allow consumers to spread payments for essential goods and keep them at levels that are within their budgets.
“The same principle applies to store cards. But store cards are endangered by current proposals from the Conservatives, which would old-plate new EU regulations and remove this convenient option for customers. We hope the Conservatives will think again.”
