15 March 2006
Indebted consumers may find it more difficult in the future to receive relatively cheap credit as lenders begin to worry more about bad debt, a market analysis company has said.
Datamonitor said that the average debt per adult in the UK was £4,021 at the end of 2005 and observed that the increasing amount of unsecured debt was beginning to affect lenders.
Many lenders have had to increase the amount of provisions set aside for bad debt, as some consumers are struggling to meet their debt commitments, the company said.
"As a result of increased indebtedness and lenders adopting a more precautionary approach to lending, consumers with a less than good credit history may find it more difficult to get access to cheap credit," said Karina Purang, financial analyst at Datamonitor.
Bank of England figures show that the amount of unsecured debt that banks had to write off increased by 27.6% last year, rising from £2.9 billion in the first three quarters of 2004 to £3.7 billion over the same period in 2005.
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