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Bank Lending Expected to Wane in 2012, BBC News Reveals

Posted on 17 February 2012 by Poundy

Bank Lending Expected to Wane in 2012, BBC News Reveals
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Total bank lending is expected to diminish by 2.2 percent this year, according to the Ernst & Young Item Club economic forecasting group, and consumer loans in particular are set to drop 5.4 percent, BBC News Online reported last week.

As a result, consumers are increasingly seeking funds from alternative financial sources such as payday lenders, and not from banks.

Bank lending to individuals has reduced by 23 percent (£34bn) since 2007, while alternative credit providers have increased their lending by 42 percent (£29bn), the Item Club said.

“The contraction in consumer credit is driven by a lack of demand to an extent, but we just need to look at the phenomenal rise in payday loans to see that the focus on decreasing demand masks a shift towards alternative providers,” said Neil Blake, senior economic adviser at the Item Club.

“Households that fall outside of the credit terms of traditional lenders are increasingly looking toward other credit providers, regardless of the cost,” Blake added.

“With banks expected to further tighten lending conditions, we expect the shift towards alternative lenders to continue unabated.”

After shrinking this year, bank lending is expected to grow a mere 0.9 percent in 2013.

BBC News Online is the most popular news website in the UK, receiving about 14 million unique visitors each week. Read the original story here.