{"id":19723,"date":"2018-04-24T13:02:06","date_gmt":"2018-04-24T12:02:06","guid":{"rendered":"http:\/\/www.propertysurveying.co.uk\/newsletter\/?page_id=19723"},"modified":"2018-11-22T16:47:25","modified_gmt":"2018-11-22T15:47:25","slug":"fca-concerned-household-debt-accusing-many-getting-deep","status":"publish","type":"page","link":"https:\/\/www.propertysurveying.co.uk\/newsletter\/?page_id=19723","title":{"rendered":"FCA concerned over household debt, accusing many of ‘getting in too deep’"},"content":{"rendered":"

\"CreditAt London\u00e2\u20ac\u2122s March 2018 Credit Summit, Jonathan Davidson, Director of Supervision \u00e2\u20ac\u201c Retail and Authorisations at the FCA spoke about \u00e2\u20ac\u0153getting affordability right in consumer credit<\/a>\u00e2\u20ac\u009d.<\/p>\n

Increase in finance purchase agreements<\/strong><\/p>\n

39 million of people in the UK now have a loan of some kind, whether for a car, computer, furniture or have raised cash through borrowing, perhaps to cover a drop in income.<\/p>\n

The number of car finance agreements has nearly doubled in ten years, to around 2.3m in 2017. However, the motor industry was praised by Mr Davidson, as he acknowledged the sustainability of \u00e2\u20ac\u02dcPCP contracts\u00e2\u20ac\u2122 which don\u00e2\u20ac\u2122t require the customer to repay the whole cost of the car during the life of the loan, and provide flexibility at the end of the agreement as customers have the option to return the car, purchase it, or use the equity in it to purchase a new one.<\/p>\n

Other borrowing sectors were more of a concern.<\/p>\n

Debt levels among 25-34 year olds<\/strong><\/p>\n

The current generation of 25-34 year olds is borrowing significantly more in relation to their income level. More people in this group\u00c2\u00a0than previous generations\u00c2\u00a0have gone to university, so how much this has distorted figures is unclear – but 30% have a Student Loan, 19% have no savings, 30% have saved\u00c2\u00a0less than \u00c2\u00a31,000, and 36% have been overdrawn in the last year.<\/p>\n

Interest-only mortgages<\/strong><\/p>\n

20% of mortgages are interest-only and will mature in around 2032, leaving thousands at risk of losing their homes (read our February 2018 article)<\/a>.<\/p>\n

Vulnerability to changes<\/strong><\/p>\n

While most borrowers live comfortably within their means, 10% of UK adults say they would be unable to cope with payment increases of less than \u00c2\u00a350. Interest rate increases may be imminent, and the cost of living has recently spiked through a falling pound and rising import costs of food and energy. Statistics show that over the last year the cost of these staples have risen faster than wages.<\/p>\n

Changing face of employment<\/strong><\/p>\n

There has been a 45% increase in self-employed people since 2000, and there are now more than 900,000 people with zero-hours contracts.<\/p>\n

Credit card debt<\/strong><\/p>\n

Four million credit cards account are now ‘persistently in debt’ \u00e2\u20ac\u201c meaning that borrowers are paying more in interest and charges than they have repaid of their borrowing over 18 months.<\/p>\n

Long-term affordability<\/strong><\/p>\n

Mortgage lenders are required to assess income and expenditure, and test the affordability of loans should interest rates rise. However, the FCA has noted a trend among households that are, on average, \u00c2\u00a31,100 more in debt one year after taking out a mortgage.<\/p>\n

Excessive debt levels led to the 2008 financial crisis during which many lenders suffered massive credit losses, causing some to collapse. Today\u00e2\u20ac\u2122s consumer debt level is close to that peak, and Mr Davidson called for firms to develop a sustainable long-term strategy for assessing the long term affordability of customers\u00e2\u20ac\u2122 financial commitments for all types of credit provision, not just mortgage lending.<\/p>\n

A history of repaying debts does not assess the long term affordability of a debt. The \u00e2\u20ac\u02dchave it now\u00e2\u20ac\u2122 attitude of the young, in particular, is part of a shifting pattern of savings, borrowing and consumption.<\/p>\n

FCA rules already require lenders to consider the potential for credit to adversely impact a customer\u00e2\u20ac\u2122s financial situation and to ensure the debt will be affordable. As a consequence of this, the rent-to-own provider, BrightHouse, was ordered to pay over \u00c2\u00a314.8 million in redress to 249,000 of its customers in October 2017, when it was found by the FCA to have entered into lending agreements which may not have been affordable.<\/p>\n

SH\/LCB<\/p>\n

Back to April 2018 Newsletter<\/a><\/p>\n

\u00c2\u00a9\u00c2\u00a0www.PropertySurveying.co.uk<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

At London\u00e2\u20ac\u2122s March 2018 Credit Summit, Jonathan Davidson, Director of Supervision \u00e2\u20ac\u201c Retail and Authorisations at the FCA spoke about \u00e2\u20ac\u0153getting affordability right in consumer credit\u00e2\u20ac\u009d. Increase in finance purchase agreements 39 million of people in the UK now have a loan of some kind, whether for a car, computer, furniture or have raised cash … Continue reading “FCA concerned over household debt, accusing many of ‘getting in too deep’”<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"folder":[562],"class_list":["post-19723","page","type-page","status-publish","hentry"],"yoast_head":"\nFCA concerned over household debt, accusing many of 'getting in too deep' - Property Surveying NEWSLETTER<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.propertysurveying.co.uk\/newsletter\/?page_id=19723\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"FCA concerned over household debt, accusing many of 'getting in too deep' - Property Surveying NEWSLETTER\" \/>\n<meta property=\"og:description\" content=\"At London\u00e2\u20ac\u2122s March 2018 Credit Summit, Jonathan Davidson, Director of Supervision \u00e2\u20ac\u201c Retail and Authorisations at the FCA spoke about \u00e2\u20ac\u0153getting affordability right in consumer credit\u00e2\u20ac\u009d. 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