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Consumer Attitudes towards Debt - UK - July 2012

The appetite for credit remains subdued as the majority of consumers continue to take a highly cautious and prudent approach to their finances. Consumer confidence remains fragile as the UK economy officially re-entered recession during Q1 2012, and ongoing fears about the future of the eurozone are doing little to improve sentiment. Against this backdrop, most consumers are unwilling to increase their exposure to debt, while a significant proportion have taken steps to reduce the amount that they owe.

However, despite the challenging conditions, consumers appear to be weathering the financial storm reasonably well. The proportion of consumers struggling with their finances has not increased, and there are signs that fewer people are failing to meet their financial commitments.

This report provides insight into the relationship between consumers and credit. It examines credit ownership in terms of the products used and the level of outstanding debt held. Attitudes towards credit and borrowing are considered, in terms of both personal debts and also from a wider perspective. The concept of responsible lending is also considered, offering some insight into the way in which consumers perceive lenders of different types of credit.

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Table of contents

  1. Introduction

      • Abbreviations
        • Fieldwork methodology
        • Executive Summary

            • Credit ownership
              • Seven in ten have outstanding credit
                • Figure 1: Types of credit held, May 2012
              • Some 30% have unsecured debts of more than £5,000
                • Figure 2: Outstanding unsecured debt, May 2012
              • Almost 50% with secured debts owe less than £70,000
                • Figure 3: Outstanding secured credit, May 2012
              • Trends in lending
                • Net unsecured lending remains subdued
                  • Figure 4: Gross and net unsecured lending to individuals, January 2002-April 2012
                • Mortgage lending has stabilised
                  • Levels of indebtedness appear to have fallen
                    • Credit and the economic downturn
                      • Most people are trying to avoid borrowing and credit
                        • Figure 5: Impact of the economic downturn on attitudes towards debt and credit, May 2012
                      • Attitudes towards credit
                        • The majority see themselves as responsible users of credit…
                          • Figure 6: Attitudes towards own debts, May 2012
                        • …but have concerns about the way others use credit
                          • Figure 7: Agreement with general attitudes towards debt, May 2012
                        • Payday loan and door-to-door lenders are widely seen as irresponsible
                          • Figure 8: Assessment of lender responsibility, by credit type, May 2012
                        • What we think
                        • Issues in the Market

                            • Is the appetite for credit starting to return?
                              • To what extent is the cautious consumer mindset here to stay?
                                • Is consumer indebtedness getting worse?
                                  • Are people taking personal responsibility for their debts and financial situation?
                                    • To what extent are credit providers seen as responsible?
                                    • Future Opportunities

                                      • Selling the concept of credit to a more prudent generation
                                        • Don’t be afraid to say no
                                          • Leading the way on responsible lending
                                          • Economic Outlook

                                            • Key points
                                              • Fears of a double-dip recession become a reality
                                                • Figure 9: UK GDP, Q1 2008-Q1 2012
                                              • Downturn in inflation should ease pressure on household budgets
                                                • Figure 10: RPI and average weekly earnings, 2006-12
                                              • Savings ratio fluctuates as households face inflationary pressures
                                                • Figure 11: Savings ratio, 2006-12 (Q1)
                                              • Unemployment rate has increased over the last 12 months
                                                • Figure 12: UK headline unemployment rate, 2008-12
                                            • Financial Wellbeing

                                              • Key points
                                                • Around one in ten are in some level of financial difficulty
                                                  • Figure 13: Current financial situation, May 2012
                                                • Some signs of improvement in sentiment
                                                  • Figure 14: Trends in current financial situation, November 2009-May 2012
                                                • Proportion struggling remains fairly consistent
                                                  • More than a fifth are anxious about financial future
                                                    • Figure 15: Consumer sentiment for the coming year, May 2012
                                                  • Financial anxiety has increased
                                                    • Figure 16: Trends in consumer sentiment for the coming year, November 2009-May 2012
                                                  • More than 80% have been affected by the downturn
                                                    • Figure 17: Impact of the economic downturn, May 2012
                                                  • Impact of downturn has remained broadly consistent
                                                    • Figure 18: Trends in the impact of the economic downturn, December 2009-May 2012
                                                • Consumer Credit Lending

                                                  • Key points
                                                    • Consumer credit lending is edging upwards
                                                      • Figure 19: Gross and net unsecured lending to individuals, January 2002-April 2012
                                                    • Credit cards are primarily used as a payment tool
                                                      • Figure 20: Gross and net credit card lending, 2006-11 (seasonally adjusted)
                                                    • Demand for other forms of consumer credit remains weak
                                                      • Figure 21: Gross and net other consumer credit lending, 2006-11 (seasonally adjusted)
                                                  • Mortgage Market Lending

                                                    • Key points
                                                      • Mortgage lending shows marginal increase in 2011
                                                        • Figure 22: Gross and net mortgage lending, 2006-11 (seasonally adjusted)
                                                      • Property still seen as a good long-term bet
                                                        • Injection of housing equity continues
                                                          • Figure 23: Housing equity withdrawal, 2005-12 (seasonally adjusted)
                                                      • Write-offs, Repossessions and Arrears

                                                        • Key points
                                                          • Some stability in mortgage arrears and repossessions…
                                                            • Figure 24: Mortgage arrears and repossessions, Q1 2008-Q1 2012
                                                          • …but there are signs that repossessions could rise in the future
                                                            • Write-offs fell by 30% in 2011
                                                              • Figure 25: Write-offs of loans to individuals, 2006-11
                                                            • Individual insolvencies appear to be in decline
                                                              • Figure 26: The number of individual insolvencies in England and Wales, by type, Q2 2009-Q1 2012
                                                          • Credit Ownership

                                                            • Key points
                                                              • Seven in ten have some form of outstanding credit
                                                                • Figure 27: Types of credit held, May 2012
                                                              • Nearly a quarter have three different types of outstanding credit
                                                                • Figure 28: Repertoire of types of credit held, May 2012
                                                                • Figure 29: Types of credit held, by repertoire of types of credit held, May 2012
                                                              • Those with exposure to multiple forms of credit are more likely to be struggling
                                                                • Figure 30: Current financial situation, by repertoire of types of credit held, May 2012
                                                              • 24-44-year-olds more likely to have several forms of credit
                                                              • Level of Outstanding Debt

                                                                • Key points
                                                                  • A third of those with unsecured debts owe less than £1,000
                                                                    • Figure 31: Outstanding unsecured debt, May 2012
                                                                  • Personal loan holders are more likely to owe at least £3,000
                                                                    • Figure 32: Types of credit held, by outstanding unsecured debt, May 2012
                                                                  • Ownership of multiple credit products leads to larger debt burden
                                                                    • Figure 33: Outstanding unsecured debt, by repertoire of types of credit held, May 2012
                                                                  • Link between financial health and unsecured debt
                                                                    • Figure 34: Outstanding unsecured debt, by current financial situation, May 2012
                                                                  • Only 6% of those with secured debts owe more than £200,000
                                                                    • Figure 35: Outstanding secured credit, May 2012
                                                                    • Figure 36: Outstanding secured credit, by annual household income, May 2012
                                                                  • Link between secured and unsecured debts
                                                                    • Figure 37: Outstanding unsecured debt, by outstanding secured credit, May 2012
                                                                • Credit and the Economic Downturn

                                                                  • Key points
                                                                    • Seven in ten are trying to limit their exposure to credit
                                                                      • Figure 38: Impact of economic downturn on finances, May 2012
                                                                    • Even those in a good financial position are reluctant to use credit
                                                                      • Mortgage holders are more wary about using credit
                                                                        • Figure 39: Impact of economic downturn on finances, by most popular types of credit held, May 2012
                                                                      • Multiple credit holders are being more careful about their spending
                                                                        • Figure 40: Impact of economic downturn on finances, by repertoire of types of credit held, May 2012
                                                                      • Two fifths have actively tried to reduce their debts
                                                                        • Figure 41: Impact of the economic downturn on attitudes towards debt and credit, May 2012
                                                                      • Different age groups take different approaches to shore up their finances
                                                                        • Unsecured credit used to prop up household finances for the minority
                                                                          • Figure 42: Types of credit held, by impact of the economic downturn on attitudes towards debt and credit, May 2012
                                                                        • Multiple credit holders are keen to reduce their exposure to debt
                                                                          • Figure 43: Impact of the economic downturn on attitudes towards debt and credit, by repertoire of types of credit held, May 2012
                                                                      • Attitudes Towards Personal Debt

                                                                        • Key points
                                                                          • Credit users strive to be seen as responsible…
                                                                            • Figure 44: Attitudes towards own debt(s), May 2012
                                                                          • …but almost two fifths have some concerns about being in debt
                                                                            • The tipping point – £3,000 in unsecured debts
                                                                              • Figure 45: Attitudes towards own debt(s), by outstanding unsecured debt, May 2012
                                                                            • Multiple credit users are more likely to have concerns
                                                                              • Figure 46: Attitudes towards own debt(s), by repertoire of types of credit held, May 2012
                                                                            • Forced borrowers are more likely to bury their heads
                                                                              • Figure 47: Attitudes towards own debt(s), by impact of the economic downturn on attitudes towards debt and credit, May 2012
                                                                          • General Attitudes Towards Debt and Credit

                                                                            • Key points
                                                                              • A strong sense that credit is often used for the wrong reasons
                                                                                • Figure 48: General attitudes towards debt and credit, May 2012
                                                                              • There is a time and a place to use credit
                                                                                • Older consumers are more concerned about the use of credit
                                                                                  • Figure 49: General attitudes towards debt and credit, by age, May 2012
                                                                                • Higher earners are more likely to see positive benefits of credit
                                                                                  • Figure 50: General attitudes towards debt and credit, by annual household income, May 2012
                                                                                • Credit is still seen as too accessible
                                                                                  • Figure 51: Agreement with statement ‘It's too easy to get hold of credit and borrow money’, by current financial situation, May 2012
                                                                              • Assessment of Lender Responsibility

                                                                                • Key points
                                                                                  • Positive and negative perceptions of the credit market
                                                                                    • Figure 52: Assessment of lender responsibility, by credit type, May 2012
                                                                                  • Overdrafts are seen as most responsible form of consumer credit
                                                                                    • Figure 53: Assessment of lender responsibility, by selected types of consumer credit, May 2012
                                                                                  • Consumers are highly critical of the payday loan market
                                                                                    • However, some consumers can see the benefit of payday loans
                                                                                      • Credit holders are more likely to see lenders as responsible
                                                                                        • Figure 54: Assessment of lender responsibility, by credit type, by ownership of credit products, May 2012
                                                                                      • Multiple credit holders have a mixed view of the market
                                                                                        • Figure 55: Assessment of lender responsibility, by credit type, by repertoire of types of credit held, May 2012
                                                                                    • Appendix – Credit Ownership

                                                                                        • Figure 56: Most popular types of credit held, by demographics, May 2012
                                                                                        • Figure 57: Next most popular types of credit held, by demographics, May 2012
                                                                                        • Figure 58: Other types of credit held, by demographics, May 2012
                                                                                        • Figure 59: Repertoire of types of credit held, by demographics, May 2012
                                                                                    • Appendix – Level of Outstanding Debt

                                                                                        • Figure 60: Outstanding unsecured debt, by demographics, May 2012
                                                                                        • Figure 61: Outstanding secured credit, by demographics, May 2012
                                                                                    • Appendix – Credit and the Economic Downturn

                                                                                        • Figure 62: Agreement with the statements ‘It has had no impact on the way I manage my money’ and ‘I spend money more carefully than I used to’, by demographics, May 2012
                                                                                        • Figure 63: Agreement with the statements ‘I keep a closer eye on my finances in general’ and ‘I try not to borrow money or use credit’, by demographics, May 2012
                                                                                        • Figure 64: Impact of the economic downturn on attitudes towards debt and credit, by demographics, May 2012
                                                                                    • Appendix – Attitudes Towards Personal Debt

                                                                                        • Figure 65: Agreement with the statements ‘I feel comfortable with the amount of debt that I have’ and ‘I have concerns about my level of debt’, by demographics, May 2012
                                                                                        • Figure 66: Agreement with the statements ‘I try to not think about my debts’ and ‘I use credit in a responsible way’, by demographics, May 2012
                                                                                        • Figure 67: Agreement with the statement ‘I focus more on how much I’m repaying each month, rather than on the total amount I owe’, by demographics, May 2012
                                                                                    • Appendix – General Attitudes Towards Debt and Credit

                                                                                        • Figure 68: Most popular general attitudes towards debt and credit (any agree), by demographics, May 2012
                                                                                        • Figure 69: Next most popular general attitudes towards debt and credit (any agree), by demographics, May 2012
                                                                                    • Appendix – Assessment of Lender Responsibility

                                                                                        • Figure 70: Assessment of mortgage lender responsibility, by demographics, May 2012
                                                                                        • Figure 71: Assessment of credit card provider responsibility, by demographics, May 2012
                                                                                        • Figure 72: Assessment of store card provider responsibility, by demographics, May 2012
                                                                                        • Figure 73: Assessment of payday loan provider responsibility, by demographics, May 2012
                                                                                        • Figure 74: Assessment of overdraft provider responsibility, by demographics, May 2012
                                                                                        • Figure 75: Assessment of unsecured personal loan provider responsibility, by demographics, May 2012
                                                                                        • Figure 76: Assessment of student loan responsibility, by demographics, May 2012
                                                                                        • Figure 77: Assessment of homeowner/secured loan provider responsibility, by demographics, May 2012
                                                                                        • Figure 78: Assessment of door-to-door loan provider responsibility, by demographics, May 2012

                                                                                    Companies Covered

                                                                                    • Bank of England
                                                                                    • Consumer Credit Counselling Service
                                                                                    • Council of Mortgage Lenders
                                                                                    • Financial Services Authority (The)

                                                                                    Consumer Attitudes towards Debt - UK - July 2012

                                                                                    £2,195.00 (Excl.Tax)