As the pandemic eased and consumer spending returned, demand for consumer lending also returned in 2021 and into 2022. This increase in demand, as well as an increase in banks’ willingness to lend, spurred growth in lending, but this growth was largely short-lived.
In late 2021 through to 2022, banks began easing the standards for credit card approvals and increased credit card marketing to attract more credit users as the pandemic situation improved and consumers increased their spending. However, rising inflation is the true factor driving consumers to acquire new credit cards, with new cards opened in summer 2022 reaching numbers not seen since 2008.
Despite unemployment rising during the early part of the pandemic, stimulus payments and increased unemployment benefits kept household incomes high. This, in combination with the slowing construction of new homes and an increase in demand for houses as people looked for more space during lockdown, led to a sharp increase in the price of houses.
While the usage of credit cards continues to grow, especially as more people rely on these cards to make purchases of goods in this inflationary environment, growth in other payment options could affect its share of the payments market. As consumer spending, especially retail spending, returned following the contraction during the first year of the COVID-19 pandemic, buy now pay later (BNPL) exploded in the US.
Inflation, rising interest rates and a pending recession will have the largest impact on consumer lending in the coming months. The full effect of the rise in interest rates on lending is still to be seen.
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Aggregate of Consumer Credit and Mortgages/Housing. Gross Lending: The total value of loans advanced by institutions in a given year; data refers to single year only. Outstanding Balance: The collective amount owed by borrowers at the end of a given year; data refers to the cumulative impact of debt.See All of Our Definitions
This report originates from Passport, our Consumer Lending research and analysis database.
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