Officials have already made it more difficult to get a mortgage, forcing borrowers to show their bank or building society more financial information so the lender can check if the borrower will be able to pay their debts if interest rates shoot up, or if they get into financial trouble. Even the hurdle of substantially more paperwork has slowed mortgage lending.
That could be replicated here.
Officials can “make it more difficult for car financing to be agreed and arranged, with people going through more hoops to get it,” says economist David Owen at Jefferies.
Alternatives could include forcing banks to hold more capital against unsecured loans, making it more expensive to lend and limiting the amount of debt on offer. But officials have a tricky balance to strike.
“It is not simple for the FPC, if they are uncomfortable at the pace with which it is growing. It is because that is growing that the consumer has been able to perform as well as they have – if you choke it off too aggressively, you can have knock-on consequences which give you a much bigger headache than the one which you’re trying to cure,” says Wraith.