An insight into borrowing patterns in Q4

The supply and demand for business finance changes drastically towards the Christmas build-up, showing trends that are not seen during any time of year. Here, we investigate.

The supply and demand for business finance changes drastically towards the Christmas build-up, showing trends that are not seen during any time of year. We investigate below.

Property funding in Q4

From a B2B perspective, there is a natural winding down in the number of enquiries and deals transacted based on potential borrowers preferring ‘to reassess and wait for the new year.’

The Christmas period encourages work-dodging at its finest. A combination of early finishes, company socials and annual leave causes overall productivity to fall and this trickles across other industries and organisations.

For products such as commercial mortgages and bridging products, there is feedback required from other professionals such as surveyors, solicitors, mortgage advisors and banks. But with all taking a slow approach in Q4, it results in less funding. Notably, Bridging Trends showed a decrease of £10 million in funding in the bridging sector in Q4 in 2015 and a decrease of £14.83 million in Q4 of 2016.

From the consumer angle, some see the upcoming holidays as a deadline to secure their dream home, with The Council of Mortgage Lenders reporting an increase in mortgage lending to non-business households in December 2016, up 5 per cent from November and first-time buyers up 9 per cent.

Business lending ‘softens’ in Q4

A similar slowdown approach occurs for SME business owners (companies with turnover of less than £25 million), again preferring to re-evaluate in the new year. The Bank of England’s reported that business lending ‘softened’ over the final three months of 2016.

Consumer credit increases big time in Q4

Unsurprisingly, the demand for consumer credit increases in the run up to the Christmas season. This includes purchases on buying gifts, festive meals, socialising and holidays. Some sources suggest that there is a demand for home improvements and refurbishments for those looking to entertain family and friends in time for December 25th.

Whilst reports showed that the applications for credit cards remained quite stable, the amount of borrowing that customers did was well above average, with the Bank of England reporting an increase by 20 per cent in credit card defaults. (Source: Bank of England)

Speaking to a manager at Cashfloat, a specialist lender in short term loans in the UK, they explain, ‘The demand for loans during December increases by around 15 per cent to 20 per cent every year and the average loan amount increases from around £260 to £350. This not only suggests that people need to borrow, but it is more than usual.

‘We have to be cautious, however, since the quality of applicant is not as strong if they are trying to pay back debts from overspending during Christmas. We also have to be aware of the spill over in January since many people get an early pay cheque in December and then go six to seven weeks without pay.’

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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