22 December 2006
The market for personal loans contracted by 5.6% under pressure from rising interest rates and rising unemployment in 2005, new research from Datamonitor finds.
The total value of UK personal loans stood at £67.4 billion in 2004 but fell to £63.6 billion in 2005.
Interest rates have risen twice in the last few months, with a 0.25 per cent hike in August followed by another in November, taking rates to 5%.
Lenders have been becoming stricter over lending criteria in response to rising levels of bad debt.
And the British Banking Association recently held a debt forum in which banks agreed to share more information about customers in bad debt, to ensure that those with poor credit histories cannot simply transfer to another loans provider.
Consumers have begun cutting back in borrowing thanks to a number of public scares over bad debt, triggered by the revelation in the autumn that the UK was the most seriously indebted of any European country.
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