UK lenders are planning the biggest cutback to consumer loans since the start of the financial crisis, after a warning from the Bank of England that the pace of household lending is unsustainable.
While the Bank has said there is no overall debt bubble in Britain, it has expressed concern about consumer debt, which continues to grow at about 10% a year.
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This prompted the Financial Conduct Authority, which regulates consumer credit, to look into whether changes are needed to help people struggling with debt, especially with car loans and mortgages.
Most experts expect the Bank to raise interest rates before the end of the year, although some are worried this could be premature. They fear that yesterday’s figures show Britain’s consumer economy is running out of steam just when uncertainty is growing over the impact of leaving the EU.
Joanna Davies, economist at Fathom Consulting told Reuters a consumer squeeze driven by falling wages in real terms combined with historically low household savings and tightening credit condition, “didn’t bode well” for the economy.