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For some businesses, the winter solstice is a time to take their foot off the peddle and relax, but for others it can be the most profitable time of year fueled by consumer behaviour and Christmas spending.

B2B Lending

For business-to-business lending, there is a noticeable drop in the number of deals transacted and completed in Q4. Several SMEs see the period as a way to complete their existing work and 'reassess' their growth in the new year.

The last few weeks of the year are characterised by clock watching and office dodging as many senior staff indulge in company socials, early finishes and annual leave - and this culture seems to manifest across several industries, countrywide.

The £7 billion-a-year industry of commercial mortgages and bridging finance shows a decline in October to December, with Bridging Trends showing a decrease of £10 million in funding in Q4 in 2015 and a decrease of £14.83 million in Q4 of 2016. This can be evidenced by how property finance usually requires sign off by other companies such as mortgage advisors, solicitors and surveyors and without them working at full capacity, the deal completion rate falls.

B2C Lending

By contrast, the impact of business-to-consumer lending becomes vibrant during Q4. For instance, the rate of households and first-time buyers applying and securing a mortgage seems to rise, as many aim to capture a new home. The Council of Mortgage Lenders reported an increase in mortgage lending to non-business households in December 2016, up 5% from November and first-time buyers were up 9%.

Last year, the average household spent around £800 on Christmas across food, presents, holidays and celebrating. This generated a huge demand for short term credit as UK households felt the pinch. Above all, the timings of getting paid from work do not help this shortage of cash flow - since many employers will pay their staff an early salary in December, leaving a 6 to 7-week gap until their next payday in January.

Whilst credit card applications remained quite stable last year, the amount of customer borrowing was significant, with the Bank of England reporting an increase in default rate from 4.4% in Q3 to 24.3% in Q4 (Source: Bank of England, Credit Conditions Survey Q4, 2016, P.8)

In the sub-prime lending category, the role of guarantor lending becomes popular in Q4 as low-credit customers aim to leverage their guarantor's credit rating to borrow funds. GuarantorLoans.com saw loan enquiries increase 54% in December compared to November with the average loan size increasing from £3,000 to £4,600.