Opinion on current trends or market issues

Adapting to the new ‘normal’

Nick Mothershaw

All providers of financial services face an increasingly complicated environment littered with economic uncertainty, a rising cost of living and the prospect that interest rates will return to more normal levels at some stage.

After a steep decline between 2008 and 2009, volumes of new lending are becoming stable in what is now a more complicated risk environment. The credit industry is being forced to evolve to cope with new ‘normal’ trading conditions featuring radically different patterns of financial behaviour and new sources and styles of competition.

Things have changed significantly over recent years. One example being that difficulties in the job market mean many households that had previously used credit only for big ticket items are now seeking credit to plug gaps in small and less predictable household incomes.

Booming rental market

The efforts of mortgage lenders and the government to help more people overcome some of the new challenges associated with purchasing property have yielded results. Recent figures from the Council of Mortgage Lenders are encouraging.

But the unpredictability of the housing market, the need for significant deposits and the fact that incomes have struggled to keep pace with inflation, has understandably created a climate of caution amongst potential first time buyers whose entrance to the market would boost activity at all levels.

More caution from consumers around home ownership has led to a booming rental market. Rental yields have increased across many parts of the country out of economic necessity and the desire from many for a more flexible lifestyle. Lots of people with sufficient means to buy a home now actively choose to rent.

Alternative lending

Other providers of financial services are also affected. Inflation has hit household budgets hard as increases in income have not kept pace with rising prices. Many more people now seek credit to help meet day-to-day living costs, creating a multitude of alternative lenders offering quick decisions and flexible products to bridge short-term gaps in income.

Alternative lenders – including peer to peer providers, credit unions and short term sources – are now an established part of the diversifying consumer lending landscape. Many consumers choose these sources, not out of desperation, but because they are simple and easy to apply for online. This appeals to today’s technology savvy young adults.

Fraud continues to rise

Tighter regulation and more widespread adoption of sophisticated affordability assessments means that overstretched consumers now find it more difficult to secure credit. This is contributing to a relentless rise in fraud, with increasing numbers of people presenting inaccurate information seeking unsuitable or unaffordable products.

Paul Vescovi
Managing Director of Experian’s UK&I Credit Services

Paul Vescovi commenced as Managing Director of Experian’s UK&I Credit Services business in March 2011 after spending 4 years as Country Manager for Experian Australia & New Zealand. Previous to his Experian role, Paul spent 5 years as a General Manager at Alinta (an Australian electricity, gas and water infrastructure company) and 8 years at PricewaterhouseCoopers Consulting which included overseas assignments in the US for 1 year, China for 4 years and Japan for 2 years


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