Global consumer lending: Size, segmentation and forecast for the worldwide market
David Parry, Managing Consultant at Finaccord.
In real terms, consumer lending balances have been rising most rapidly in China, the Philippines and Colombia although among major countries, Danish consumers carry the most debt as a proportion of GDP.
Worldwide, the value of consumer lending balances outstanding at the end of 2015 was USD 42.3 trillion (or USD 42,263 billion) with this global market size having risen at a nominal compound annual growth rate of 3.3% since 2011, when balances amounted to USD 37.1 trillion, although this growth rate was 1.8% in real terms (adjusting for inflation). Moreover, in 2015, the worldwide market value broke down between USD 32.9 trillion (77.9% of the total) in residential mortgage balances (the largest single segment of the global market), USD 7.5 trillion (17.8%) in non-mortgage consumer lending balances excluding credit card loans and USD 1.8 trillion (4.3%) in credit card balances.
These are top-level findings from a new research study released by Finaccord titled Global Consumer Lending: Size, Segmentation and Forecast for the Worldwide Market.
“At a respective USD 17.3 trillion, USD 3.0 trillion and USD 2.2 trillion in balances outstanding, the US, China and the UK were the world’s largest consumer lending markets in 2015”, commented David Parry, Managing Consultant at Finaccord. “Meanwhile, in nominal terms, and across the 40 major markets analysed in depth by Finaccord, the markets that grew most rapidly between 2011 and 2015 were those of Argentina, China and the Philippines with compound annual growth rates of 27.6%, 20.9% and 18.3%, respectively. However, once national inflation rates have been accounted for, the fastest-growing markets were those of China, the Philippines and Colombia with respective real compound annual growth rates of 18.7%, 16.0% and 13.6%.”
A further significant finding of the study is that both the composition of consumer lending markets between different types of loan and their values relative to GDP vary substantially between different countries. In 2015, and at 97.0% of the total, residential mortgage balances accounted for the highest proportion of total consumer lending in the Netherlands while non-mortgage consumer lending balances excluding credit cards peaked at 59.8% in Indonesia and credit card balances were most prominent within the total in Argentina, at 35.1%.
“In terms of total consumer lending balances as a percentage of national GDP, Denmark can be identified as the most indebted country among the 40 examined given a ratio of 118.7%", continued David Parry. "However, like the Netherlands, this is a country that is largely dominated by mortgage lending at relatively low rates of interest. In contrast, and at 38.4%, the country with the highest ratio of ‘expensive’ non-mortgage consumer lending and credit card balances to GDP in 2015 was South Korea. Nevertheless, South Korean consumers are not especially debt-laden overall as their mortgage balances are not especially high.”
Looking ahead, Finaccord’s research indicates that the global consumer lending market is likely to increase at faster nominal and real compound annual growth rates between 2015 and 2019 than it did between 2011 and 2015 with the result that it will reach a value of around USD 51.9 trillion by 2019, which converts to USD 48.3 trillion when deflated in line with forecast inflation rates. “Worldwide, we expect non-mortgage consumer lending and credit card balances to outgrow residential mortgage balances through to 2019”, concluded David Parry.
“To a considerable extent, this will be due to trends in the US given that it accounted for just over 40% of global mortgage and non-mortgage lending balances excluding credit cards in 2015 and just under 50% of credit card balances outstanding."
