FICO UK Credit Market Report January 2021: More Signs of Stress for the Financially Stretched
LONDON, March 10, 2021 /PRNewswire/ --
Highlights
- Average spend on UK credit cards fell 14 percent to £570
- Payments as percentage of balance reached over a two year high
- Percentage of accounts and balances missing two payments continued to increase
- Proportion of consumers using cash continued to fall, although higher amounts are being withdrawn
Global analytics software provider FICO today released its analysis of UK card trends for January 2021. Furlough and forbearance appear to be masking the true impact of the pandemic.
Slowly rising missed payment rates
"It is normal to see increases in the percentage of accounts and balances missing payments in January as a result of Christmas spend, but this January the growth has not been as marked as we saw last year," explained Stacey West, principal consultant for FICO® Advisors. "The percentage of accounts missing one payment and the percentage of their balance to total increased in January, a normal seasonal trend. Of concern, however, is the increase in the two missed payment rate, with average balances on accounts missing two payments 10.6 percent higher than a year ago."
Average balances on accounts missing three or more payments also continued to increase, with clear indications that once a proportion of consumers miss a payment, they are unable to resume paying, rolling continually through the levels of delinquency. Those with higher balances particularly face this challenge.
Spend on UK cards decreased with percentage of payments increasing
The average spend on UK credit cards fell by £93 to £570 and followed the normal January trend, although it was double the percentage drop seen in January 2020 and sales are 12 percent lower than a year ago.
"It is likely that average spend will start to increase from April onwards as we come out of lockdown and more and more sectors reopen," continued Stacey West.
Adding to the confusing picture, the percentage of payments to balance continued to increase to the highest level in over two years. The monthly increase in 2021 was above that seen in January last year, and the percentage of payments is now 10 percent higher than a year ago.
Card limits stabilise, but the average amount over-limit increasing
Average card limits were stable, increasing just £1 in January. However, the average amount over the card limit increased to an over two-year high and is 31.9 percent higher than a year ago.
These card performance figures are part of the data shared with subscribers of the FICO® Benchmark Reporting Service. The data sample comes from client reports generated by the FICO® TRIAD® Customer Manager solution. Issuers wishing to subscribe to this service can contact staceywest@fico.com.
FICO and TRIAD are registered trademarks of Fair Isaac Corporation.
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