New business volumes in the consumer finance market were down 8% in June compared to last year, new figures released by the Finance & Leasing Association (FLA) have shown.

June saw £9.1bn worth of new consumer finance business, meaning the market in the first half of the year has held steady compared with the same period in 2023.

Members at the FLA from across the consumer finance sector include banks, credit card providers, store card providers, second charge mortgage lenders, personal loan and instalment credit providers, as well as motor finance providers.

According to the latest figures, the credit card and personal loans sectors (£4.7bn) together reported new business 8% lower in June compared with the same month in 2023, while the retail store and online credit sector (£660m) reported a fall in new business of 9% over the same period.

Director of research and chief economist at the FLA, Geraldine Kilkelly, said: “The consumer finance market reported new business 1% lower in Q2 2024 as a whole as the impact of successive interest rate rises between 2021 and 2023 continued to weigh on demand.

“The Bank of England’s decision to cut Bank Rate in August and the return of inflation to the 2% target has improved the outlook for household spending power. Our latest research suggests that total UK new consumer credit by value is likely to grow in 2024 by 6% and by a further 5% in 2025.”

Conversely, the second charge mortgage market recorded a rise in activity in June.

New second charge mortgage lending totalled £145m in June, up 7% on the same month last year, while the number of new agreements made during the month, at 3,019, was up by 3%.

Commenting on these figures, the FLA’s director of consumer and mortgage finance and inclusion, Fiona Hoyle, said: “In June, the second charge mortgage market reported the highest number of new agreements since September 2022 which meant the market grew each month in the first half of 2024.

“New business by value and volume grew in the first six months of 2024 overall by 17% and 12% respectively, compared with the same period in 2023.

“The distribution of new business by purpose of loan in the first half of 2024 showed that the proportion of new agreements which were for the consolidation of existing loans was 59.2%; for home improvements and the consolidation of existing loans was 23.1%; and for home improvements only was 12.5%.”

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