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How Consumer Borrowing Patterns Change During Christmas


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With the Christmas season fast-approaching, busy shoppers are on the streets and Internet shopping sites look for deals, presents and ways to soak up the festivities. Being a big family-oriented holiday, households like to make it that extra bit special which is no surprise that Christmas spending in the UK exceeded £77 billion last year.

We take a closer look at some consumer borrowing trends during this busy season.

Mortgages and Home Improvements Increase.

Data from the Council of Mortgage Lenders reported an increase in mortgage lending to households in December 2016, up 5% from November and first-time buyers up 9%. This trend follows the desire of new homeowners looking to get on the ladder and in their homes in time for Christmas, seeing December 25th as a nice deadline. Similarly, for mortgage brokers and lenders, there is a drive to have the deals signed and completed by Christmas day before they take time off work.

Several existing households look at fixing up their residence with home improvement loans. Many homes like the idea of having a new kitchen or bathroom fitted just in time for their Christmas guests – again using the holiday as a deadline to get their houses in check.

Credit Card Applications Remain Stable.

Remarkably, data from The Bank of England showed that applications for credit cards in Q4 of 2016 remained quite stable. However, the average credit card default rate increased from 4% during the rest of the year to as high as 20% around December-time.

This highlighted the demand for credit as families splurge on things like food, drinks, decorations, entertainment and above all, Christmas gifts – with the average household spending around £800 on Christmas related goods each year.

Demand for Short Term Loans Increase.

The need for short term loans to rises significantly during the Christmas period, especially for loan amounts of £200 and £300. The demand can be explained not only by over-spending, but also since many employers pay their staff in early December and then in late January, causing a 6 or 7-week gap between pay dates. This means that a Christmas hangover of household debt can also emerge in January and sometimes February too.

A representative from payday loans lender Uncle Buck said that “We typically see an increase in applications during the Christmas period and online visitor traffic tends to go up by at least 15% to 20%. This is largely due to an increase in consumer spending so we have to be cautious and sometimes restrict our lending criteria to account for a higher default rate.’


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