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Consumer Attitudes Towards Debt - UK - July 2015

Published By :

Mintel

Published Date : Jul 2015

Category :

Banking

No. of Pages : N/A

Lending has increased since the recession and people have started to show signs of becoming more comfortable with credit, whether out of necessity or choice. Rising confidence in line with the economic recovery is only making people more certain their repayments will remain manageable, but an interest rate rise could leave them exposed.

Introduction

Definitions
Abbreviations

Executive Summary

Unsecured lending driven up by spikes in new credit
Figure 1: Monthly gross and net unsecured lending to individuals, excluding the Student Loans Company, January 2009-April 2015 (not seasonally adjusted)
More than half of people have outstanding unsecured debt
Figure 2: Credit product ownership, by age group and credit type, May 2015
The level of individual debt is stable
Figure 3: Level of outstanding debt, by gross annual household income, May 2015
Women more likely to say they are struggling with debts than men
Figure 4: Proportion of people struggling with their debt repayments, by age and gender, May 2015
44% of debtors would consider arranging further credit if they were struggling
Figure 5: Proportion of those who have any debt that would consider arranging further credit if they were struggling with debt repayments, by age and gender, May 2015
Retail banks prove popular for the future, but online sources are gathering pace
Figure 6: Most likely future sources of credit, May 2015
Most debtors want credit companies to provide proactive protection
Figure 7: Attitudes towards credit, May 2015
Debtors are striving to live within their means
Figure 8: Attitudes towards debt, May 2015
More than half are happy to talk about their debts
Figure 9: Agreement with the statement ‘I am comfortable talking about how much money I owe’, by level of outstanding unsecured debt, May 2015

Issues and Insights

Online-only brands could challenge high street lenders
The facts
The implications
People are becoming more comfortable with long-term unsecured debt
The facts
The implications

The Market – What You Need to Know

The economy is showing signs of steady recovery
Financial wellbeing is steady, but confidence is yet to return
Lending gets competitive in the low interest rate environment
Mortgage lending moves up despite the Mortgage Market Review (MMR)
More borrowers are managing to repay their debt without issue

Economic Outlook

GDP growth fails to lift disposable incomes…
Figure 10: Quarterly change in GDP, 2009 Q1-2015 Q1
Figure 11: GDP per head at current market prices, and real household disposable income per head, 2009 Q1-2014 Q4
…but inflation has fallen significantly
Figure 12: Annual percentage change in CPI and RPI measures of inflation, January 2009-April 2015
Interest rates have stayed low…
Figure 13: UK interest rates, January 2009-May 2015
…leaving people with limited incentive to save
Figure 14: Household savings ratio, 2009 Q1-2014 Q4
Falling unemployment gives hope to the recovery
Figure 15: Total UK unemployment rate among people aged 16+, January 2009-February 2015

Consumer Financial Wellbeing

Financial wellbeing has stabilised for the first time since the recession
Figure 16: The financial wellbeing index, February 2009-February 2015
Figure 17: Trend in consumer financial situation, May 2015
28% feel better off than a year ago
Figure 18: The recovery index, 2011-15
Figure 19: Trend in consumer financial situation compared to a year ago, May 2015
Confidence about the future has slipped during 2015
Figure 20: The financial confidence index, 2009-15
Figure 21: Trend in consumer sentiment for the coming year, May 2015

Consumer Credit Lending

Unsecured lending driven up by spikes in new credit …
Figure 22: Monthly gross and net unsecured lending to individuals, excluding the Student Loans Company, January 2009-April 2015 (not seasonally adjusted)
…but credit card providers are coming under pressure over aggressive marketing
Figure 23: Yearly gross and net credit card lending to individuals, excluding the Student Loans Company, (not seasonally adjusted) 2009-14
Non-credit card lending is becoming more common
Figure 24: Yearly gross and net other consumer credit lending to individuals, excluding the Student Loans Company, (not seasonally adjusted) 2009-14

Mortgage Market Lending

Mortgage lending climbs back towards pre-recession levels …
Figure 25: Total secured lending, by gross and net advances, 2009-14 (not seasonally adjusted)
…but approvals and re-mortgages falter following the MMR
Figure 26: Number of quarterly mortgage approvals seasonally adjusted, by type, Q1 2009-Q1 2015

Write-offs, Repossessions and Arrears

Write-offs drop as creditors push for repayment…
Figure 27: Value of write-offs to loans to individuals, 2009-14 (not seasonally adjusted)
…with arrears and repossessions falling
Figure 28: Mortgage arrears (2.5% or more of mortgage balance) and repossessions, Q1 2009-Q1 2015
…and improving personal finances quell insolvencies
Figure 29: Individual insolvencies in England and Wales, by type, 2009-14 (not seasonally adjusted)
A greater proportion of bankruptcies were initiated by creditors in 2014
Figure 30: Individual bankruptcies in England and Wales, by proportion of petition type, 2009-14 (not seasonally adjusted)
Figure 31: Individual bankruptcies in England and Wales, by petition type, 2009-14 (not seasonally adjusted)

The Consumer – What You Need to Know

63% of people have outstanding debt
The level of outstanding debt people have is under control
Women are more likely to say they are struggling with debt repayments
Young men are the most likely to seek further credit if they were struggling with repayments
Online options are growing in popularity as future sources of credit
Debtors want more support to prevent financial difficulty

Credit Product Ownership

Over half of people have outstanding unsecured debt …
Figure 32: Credit product ownership, May 2015
…and younger people are used to having unsecured debt
Figure 33: Credit product ownership, by age group and credit type, May 2015
People try to limit themselves to one credit type
Figure 34: Credit product ownership, repertoire analysis, May 2015

Level of Outstanding Unsecured Debt

The extent of personal debt is under control…
Figure 35: Level of outstanding unsecured debt, 2012-15
Figure 36: Level of outstanding debt, May 2015
…but the highest earners have racked up the biggest debts
Figure 37: Level of outstanding debt, by gross annual household income, May 2015

Level of Comfort with Debt Repayments

The majority are comfortable with their debt repayments…
Figure 38: Level of comfort with debt repayments, May 2015
…but women are more likely to say they are struggling
Figure 39: Proportion of people struggling with their debt repayments, by age and gender, May 2015

Approaches to Financial Difficulty

44% of debtors would consider further credit if they were struggling …
Figure 40: Approaches to struggling with debt repayments, May 2015
…and young males are at the front of the queue
Figure 41: Proportion of those who have any debt that would consider arranging further credit if they were struggling with debt repayments, by age and gender, May 2015
Figure 42: Proportion of those who have any debt that would arrange further credit if they were struggling with debt repayments, by gross annual household income, May 2015
Younger women are more likely to seek out advice
Figure 43: Proportion of those who have any debt that would seek advice if they were struggling with debt repayments, by age and gender, May 2015

Future Sources of Credit

Online payment providers have the opportunity to rival banks …
Figure 44: Most likely future sources of credit, May 2015
…if they can build an early relationship with Millennials
Figure 45: Proportion of people that would be most likely to use an online payment provider if they were to obtain credit in future, by generation, May 2015

Attitudes towards Credit

Most debtors want lenders to support them before they get into difficulty
Figure 46: Attitudes towards credit, May 2015
Clear gaps in knowledge when it comes to credit ratings
Young males show no signs of changing short-term credit habits
Figure 47: Agreement with the statement ‘I prefer the flexibility of short-term credit options such as payday loans and overdrafts’, by age and gender, May 2015
Peer-to-peer lenders have the opportunity to make ethics a focus
Figure 48: Agreement with the statement ‘I’d consider using a peer to peer lending service (eg Zopa or Funding Circle’, by age, May 2015

Attitudes towards Debt

Most debtors still want to live within their means…
Figure 49: Attitudes towards debt, May 2015
…and keeping repayments low is more important to older borrowers
Figure 50: Agreement with the statement ‘Keeping debt repayments low is the most important thing when borrowing money’, by age, May 2015
More than half are comfortable talking about their debt – regardless of how high it is
Figure 51: Agreement with the statement ‘I am comfortable talking about how much money I owe’, by level of outstanding unsecured debt, May 2015

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