The UK lending market is anticipated to see some shifts in the coming years from 2022 to 2025. Debt Service Coverage Ratio (DSCR) loans specifically are projected to be impacted by economic conditions and regulations. This article will explore the forecasts and predictions surrounding DSCR lending trends in the UK over the next few years.
How will auto loan asset-backed securities trend in the UK from 2022-2025?
Auto loan asset-backed securities (ABS) make up a segment of the UK DSCR lending market. ABS are securities backed by a pool of auto loans. Investors can purchase these securities to gain exposure to the payments from the underlying auto loans.
According to forecasts, what is the expected trajectory for auto loan ABS volumes in the UK through 2025?
- Auto loan ABS volume is predicted to increase modestly (8%) to around $105 billion in 2022. This indicates a slight rebound after the declines seen in 2020 and 2021 during the pandemic.
- Growth is then expected to stabilize from 2023 to 2025, with auto loan ABS volumes forecast to remain around $105 billion over that period.
- The auto sales market has faced challenges recently, which may limit significant growth in auto loan ABS. But volumes are still expected to see a small uplift.
What is the business lending outlook in the UK for 2022-2025?
Business lending is a key area of the UK credit market. Loans to businesses help fuel economic growth and job creation. What is the forecast for business lending in the coming years?
- The outlook for business lending is set to gradually improve over the next few years as the economy recovers post-pandemic.
- However, growth is expected to remain constrained through 2023, with business lending projected to expand by just 0.5% net next year.
- More significant growth of around 2% net is forecast for 2024 as economic activity picks up.
- But the environment is still anticipated to be challenging, with only modest single-digit growth predicted.
In summary, while business lending is set to rebound from the pandemic declines, the recovery is expected to be slow. Growth is likely to remain muted over the next couple of years.
How will bank lending to businesses trend in the UK from 2022-2025?
Banks are a key source of credit for UK companies. But what is the outlook for bank business lending in the coming years?
- Bank lending to businesses is forecast to fall 3.8% (net) in 2022. This would represent one of the largest single-year declines in over a decade.
- The drop is attributed to reduced demand as economic uncertainty weighs on business investment. Rising interest rates may also constrain borrowing.
- Slight growth is expected to return in 2023, before rebounding 0.9% (net) in 2024 as conditions improve.
- But net growth will remain low, between 0-2% annually, as the environment normalizes.
In summary, bank lending to UK businesses is projected to contract notably this year before minimal growth resumes. The weak economic climate is dampening demand and borrowing.
What is the forecast for UK mortgage lending from 2022-2025?
The UK mortgage market makes up a major component of British lending. But mortgage activity is sensitive to economic factors like interest rates and inflation. What trajectory is projected for mortgage lending over the next few years?
- UK mortgage lending is forecast to grow just 0.4% (net) in 2023 – the slowest annual growth since 2011.
- Slightly higher growth of 1.4% (net) is predicted for 2024 as conditions stabilize. But this would still be historically low.
- Rising interest rates are expected to constrain mortgage borrowing by reducing affordability.
- High inflation and the cost-of-living crisis may also limit activity as consumers have less disposable income.
In summary, anemic growth is forecast for UK mortgage lending over the next couple years. Economic headwinds like high rates and inflation are creating an unfavorable environment.
What is the outlook for UK consumer credit from 2022-2025?
Consumer credit – including credit cards, personal loans, overdrafts, etc. – makes up a portion of British lending activity. What trends are projected for UK consumer borrowing in upcoming years?
- Demand for consumer credit is forecast to increase 4.8% (net) in 2022, as consumers rely more on credit amid the cost-of-living crisis.
- Slightly higher growth of 5.3% (net) is predicted for 2024 as conditions improve somewhat.
- But affordability issues due to high inflation may constrain consumer credit demand.
- Default rates are also expected to rise, indicating financial stress.
In summary, modest single-digit growth is projected for UK consumer credit borrowing the next couple years. But rising costs may dampen demand and increase delinquencies.
What is the forecast for UK assets under management from 2022-2025?
Assets under management (AUM) – the total market value of investments managed by firms – is an indicator of the asset management industry’s health. What is the outlook for UK AUM over the coming years?
- UK AUM is forecast to decline by almost 11% in 2022, as turbulent markets weigh on investment values.
- A partial rebound of 2.6% growth is expected in 2023.
- More robust growth of 6.5% is then predicted for 2024 as markets stabilize.
- But significant volatility will likely persist, limiting a full recovery in assets.
Overall, UK assets under management are projected to drop sharply this year before recovering modestly in 2023-2024. Ongoing market uncertainty may constrain growth.
What is the forecast for UK lending write-off rates from 2022-2025?
Write-off rates measure the percentage of loans financial institutions remove from their books after determining they are uncollectible. This serves as an indicator of credit quality. What is projected for UK lending write-offs?
- Write-off rates are forecast to rise to 1.5% in 2022, up from 1.0% in 2021. This indicates deteriorating credit conditions.
- Rates may peak at around 2% in 2023 as the economy slows before improving slightly in 2024.
- But write-offs are expected to remain elevated compared to pre-pandemic levels into 2025.
In summary, UK lending write-off rates are predicted to increase notably over the next couple years. This reflects worsening credit performance and financial stress from the weak economy.
In conclusion, UK lending trends are projected to face headwinds over 2022-2025 as the economy normalizes post-pandemic. Mortgage lending may see anemic growth due to affordability challenges. Business and consumer lending is set to rebound but remain constrained. Credit quality appears likely to deteriorate with higher write-offs. However, a gradual recovery is expected by 2024-2025 across most lending segments. The path forward will depend on how inflation, interest rates, and other economic factors evolve. But UK lending looks set for a bumpy ride in the near term.