866-997-4948(US-Canada Toll Free)

Consumers and Credit Risk - UK - February 2017

Published By :

Mintel

Published Date : Mar 2017

Category :

Banking

No. of Pages : N/A

The changing demographic profile of the UK highlights the growing need for more non-mainstream lending products. However, despite positive signs of engagement, there is a disconnect between how confident people feel about being able to access credit, and the likelihood that they are trying to improve their credit score.

Table of Content

OVERVIEW
What you need to know
Definitions

EXECUTIVE SUMMARY
The market
Unsecured lending continues to grow
Figure 1: Gross unsecured lending, 2012-16
Insolvencies rise for the first time…
Figure 2: Individual insolvencies in England and Wales, by type, 2011-16 (not seasonally adjusted)
Brexit will put a dampener on positive employment conditions
The Open Banking Standard will help to address financial exclusion
Use of alternative data will reduce financial exclusion
The consumer
Over half of the population could face difficulty accessing the credit they want
Figure 3: Factors affecting access to credit, October 2016
Two thirds of UK adults owe money on a loan or credit product
Figure 4: Loan and credit product ownership, October 2016
Majority are confident about accessing credit
Figure 5: Confidence in being accepted for credit or a loan, October 2016
Most credit users have their borrowing under control
Figure 6: Amount owed on all loan and credit products, October 2016
Credit use concerns mean people try to repay as quickly as possible
Figure 7: Attitudes towards borrowing, October 2016
Majority never check their credit score
Figure 8: Credit score checking behaviour, October 2016
Over a third are currently trying to improve their score
Figure 9: Attitudes towards credit scores, October 2016
What we think

ISSUES AND INSIGHTS
Different factors affect people’s level of access to credit
The facts
The implications
Changing employment landscape creates opportunities
The facts
The implications
Life events spark engagement with credit scores
The facts
The implications

THE MARKET – WHAT YOU NEED TO KNOW
Unsecured lending continues to grow
Insolvencies remain low
FCA reviews entire high-cost credit market
The Open Banking Standard will help to address financial exclusion

MARKET ENVIRONMENT
Unsecured lending continues to grow
Figure 10: Gross unsecured lending, 2012-16
Availability of credit has improved…
but regulation has meant tighter affordability checks
HCSTC cap has unmasked need for established non-mainstream lenders
Changing demographics highlight need for alternative lending products
Ageing population
Self-employed
Rising rental population
Insolvencies rise slightly in 2016…
Figure 11: Individual insolvencies in England and Wales, by type, 2011-16 (not seasonally adjusted)
whilst more people are seeking debt advice
Unemployment continues to fall…
Figure 12: Total UK unemployment rate among people aged 16+, quarterly, January 2010-September 2016
but Brexit could make the economic picture gloomier

REGULATORY CONTEXT
FCA reviews entire high-cost credit market
The Open Banking Standard will help to address financial exclusion
FCA to review creditworthiness

MARKET DEVELOPMENTS
Use of alternative data could reduce financial exclusion
Brokers play an important role in the non-mainstream market
Few large lenders seek lion’s share of the subprime unsecured lending market
Innovation in the non-mainstream lending markets
Guarantor loans
Credit-builder cards
Free credit score checks

THE CONSUMER – WHAT YOU NEED TO KNOW
Over half of the population could face difficulty accessing credit
The majority of people are confident they could access credit
Discomfort with credit means most want to repay quickly
Two in five want their provider to take a more active role
Important life events spark the need to improve scores

CREDIT RISK CONSUMER PROFILE
Lenders and credit risk
Over half of the population could face difficulty accessing credit
Employment or circumstantial factors
Money management issues
Experienced financial difficulties
Figure 13: Factors affecting access to credit, October 2016
People with low-risk issues more likely to be offered a higher rate
Payday loans and credit
Education around some lifestyle factors will improve credit profile
Lower-income borrowers have less access to credit
Figure 14: Household income, October 2016

LOAN AND CREDIT PRODUCT OWNERSHIP
Two thirds of UK adults owe money on a loan or credit product
Figure 15: Loan and credit product ownership, October 2016
One in 10 have a personal loan
Only 8% of people have four or more different types of products
Figure 16: Repertoire of loan and credit product ownership, October 2016
Type of products owned depends on the type of borrower
Figure 17: Loan and credit product ownership, by factors affecting access to credit, October 2016

CONFIDENCE IN ACCESSING CREDIT
Majority are confident about accessing credit
Figure 18: Confidence in being accepted for credit or a loan, October 2016
Half of people with financial difficulties remain confident
Figure 19: Confidence in being accepted for credit or a loan, by factors affecting access to credit, October 2016
Confidence rises as people get older
Figure 20: Confidence in being accepted for credit or a loan, by age, October 2016
Regional differences highlight need for financial support
Employment status affects confidence
Figure 21: Confidence in being accepted for credit or a loan, by employment status, October 2016
Lack of credit usage limits future access
Figure 22: Confidence in being accepted for credit or a loan, by loan and credit product ownership, October 2016

AMOUNT OWED ON LOAN AND CREDIT PRODUCTS
Most credit users have their borrowing under control
Figure 23: Amount owed on all loan and credit products, October 2016
Debt-to-income ratio is a key indicator
Figure 24: Amount owed on all loan and credit products, by household income, October 2016

ATTITUDES TOWARDS BORROWING
Credit use concerns mean people try to repay as quickly as possible
Figure 25: Attitudes towards borrowing, October 2016
Two in five want their provider to take a more active role
Importance placed on expert advice as online information leads to confusion
Interest in protection products but significant barriers exist
Credit use concerns mean people prefer familiar providers
Non-mainstream providers need to do more to become ‘first-choice’ lenders
Figure 26: Attitudes towards borrowing, by factors affecting access to credit, October 2016

CREDIT SCORE CHECKING
Majority of people never check their credit score
Figure 27: Credit score checking behaviour, October 2016
Two in five credit users check their score at least once a year
 Figure 28: Credit score checking behaviour, October 2016
Engagement falls when people owe less
People with existing issues are more engaged
Figure 29: Credit check scoring behaviour, by factors affecting access to credit, October 2016

ATTITUDES TOWARDS CREDIT SCORES
Over a third are currently trying to improve their score
Figure 30: Attitudes towards credit scores, October 2016
Important life events spark the need to improve scores
Figure 31: Agreement with the statement ‘I'm currently trying to improve my credit score’, by age, October 2016
Lack of connection between acceptance and credit score
Figure 32: Agreement with the statement ‘I'm currently trying to improve my credit score’, by confidence in being able to access credit, October 2016
Paying a fee could be off-putting to those in most need of understanding their credit profile
Figure 33: Agreement with the statement ‘I'm willing to pay a monthly fee for detailed information about my credit profile’, by financial situation, October 2016
Millennials are more willing to pay for detailed information
Figure 34: Agreement with the statement ‘I'm willing to pay a monthly fee for detailed information about my credit profile’, by generation, October 2016

APPENDIX – FACTORS AFFECTING ACCESS TO CREDIT
Employment or circumstance factors
Figure 35: Employment or circumstance factors affecting access to credit, October 2016
Money management factors
Figure 36: Money management factors affecting access to credit, October 2016
Financial difficulty factors affecting access to credit
Figure 37: Financial difficulty factors affecting access to credit, October 2016

APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology

List of Table

NA

Make an enquiry before buying this Report

Please fill the enquiry form below.

  • Full Name *
  • Your Email *
  • Job Title *
  • Company *
  • Phone No. * (Pls. Affix Country Code)
  • Message
  • Security Code *