Volumes of new business in the consumer finance sector fell by 4% in December, compared with the same month a year earlier.

Newly published figures by the Finance & Leasing Association (FLA) have shown that in 2022 as a whole, however, consumer finance new business was 13% higher than in 2021.

FLA members in 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 from the Association, new consumer finance business totalled £8.4bn in December. The credit card and personal loan sectors together reported a fall in new business of 5%, compared with the same month in 2021, while he retail store and online credit sector also reported new business growth of 4% over the same period.

“The consumer finance market showed signs of weaker demand in the final quarter of 2022 as real household incomes came under further pressure from higher inflation and interest rates,” commented director of research and chief economist at the FLA, Geraldine Kilkelly.

“Despite this, the continued recovery of FLA markets from the pandemic during most of last year meant that new business in 2022 as a whole reached a record level of £114.6bn.

“While the near-term outlook remains challenging, the UK avoided recession in Q4 2022, inflationary pressures have shown signs of easing, and the labour market remains robust. The FLA’s Q1 2023 Industry Outlook Survey suggested that consumer finance providers are more optimistic about the prospects for growth, with 69% expecting some increase in new business over the next year, up from 9% in Q4 2022.”

The FLA’s latest figures for the second charge mortgage market revealed that new business volumes totalled £99m in December. This was a marginal fall from the level reported for the same month in 2021.

Director of consumer and mortgage finance and inclusion, Fiona Hoyle, added: “In December, the second charge mortgage market reported its first monthly fall in new business since March 2021. 

“Despite this, new business volumes in 2022 as a whole, at 33,772 agreements, was the highest annual total since 2008. The distribution by purpose of loan in December showed 58% of new agreements were for the consolidation of existing loans, 14% for home improvements, and a further 22% for both loan consolidation and home improvements.

“As always, customers who are concerned about meeting payments should speak to their lender as soon as possible to find a solution.”

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