Christmas and VAT increase boost consumer finance figures

Christmas spending and the rush to beat the VAT increase led to the first growth in consumer finance since April 2008, according to industry figures for November 2009 published by the Finance and Leasing Association (FLA).

The credit market was boosted by growth in car finance and in-store credit, which is an indication that consumer confidence is beginning to improve. In-store credit has held up well throughout the economic downturn and in the last 12 months grew by 1%. Store cards were popular with shoppers in November, with the value of purchases bought using store cards up by 2% compared with November 2008.  Credit card finance fell by 2% over the same period, which was the smallest rate of contraction reported by FLA members over the past year. The second mortgage market continued to be hampered by the high cost of funding in the wholesale credit markets.

The FLA's head of consumer finance, Fiona Hoyle, said: "The FLA figures show early signs that consumer confidence is returning. However, we are cautious about the sustainability of any recovery because credit providers face a flood of new regulation, which may impact on the cost and availability of credit. We urge the Government and regulators to pause and take stock of the economic conditions before rushing ahead with regulatory reforms, which could jeopardise its recovery."