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Consumer Attitudes Towards Debt - UK - July 2013

“Online budgeting tools have significant potential for growth. Just over half of the internet population show an interest in using this type of service in the future. Under-45s and higher earners are much more likely than average to see the appeal of tools that help them to keep track of their finances.”

– Deborah Osguthorpe, Head of UK Financial Services Research

Some questions answered in this report include:

  • Are consumers starting to feel more confident about borrowing?
  • Who are the key targets for credit providers?
  • How has credit ownership changed in the last two years?
  • How comfortable are people with their existing debts?
  • How interested are consumers in using money management and budgeting tools?

People are starting to feel a bit more relaxed about their financial situation and the use of credit over the last 12 months. Consumer credit lending increased during 2012 and there are signs that activity in the mortgage market is also starting to pick up. Around a fifth of the online population are planning to use credit or to extend their borrowing over the next year.

Despite a more optimistic outlook than a year ago, many people continue to take a cautious approach towards using credit, with most still wary about the economy and their financial security. Although a sizeable proportion is looking to borrow money over the next year, an even higher number are planning to reduce their debts over the same period. Attitudes towards debt and credit also remain strongly negative. The majority are uncomfortable with the thought of being in debt and believe that using credit should be a last resort.

This report examines the relationship between consumers and credit. It looks at ownership of credit products and the levels of unsecured debt. It also considers how debt levels have changed in recent years and the appetite for borrowing over the next 12 months. Consumer attitudes towards debt and money management and budgeting tools are also included.

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Table of contents

  1. Introduction

      • Abbreviations
        • Fieldwork methodology
        • Executive Summary

            • Trends in lending
              • Consumer credit lending increased in 2012
                • Figure 1: Gross and net unsecured lending to individuals, January 2004-May 2013
              • Mortgage lending remains flat in 2012
                • Figure 2: Gross and net mortgage lending, 2007-12 (seasonally adjusted)
              • Credit ownership
                • Three quarters owe money on some form of credit
                  • Figure 3: Types of credit on which money is owed, April 2013
                • Level of debt and appetite for credit
                  • A fifth are planning to use credit over the next 12 months
                    • Figure 4: Expected use of credit over the next 12 months, April 2013
                  • Most people are coping with their debts
                    • Figure 5: Level of outstanding unsecured debt, April 2013
                  • Two fifths have seen their debts increase over the last three years
                    • Figure 6: Change in debt levels over the last three years, April 2013
                  • Attitudes towards credit and debt
                    • Negative views of using credit persist
                      • Figure 7: Attitudes towards borrowing money and debt, April 2013
                    • Scope to expand money management and budgeting activities
                      • Figure 8: Consumer interest in using money management and budgeting tools, April 2013
                    • What we think
                    • Issues in the Market

                        • Are consumers starting to feel more confident about borrowing?
                          • Who are the key targets for credit providers?
                            • How has credit ownership changed in the last two years?
                              • How comfortable are people with their existing debts?
                                • How interested are consumers in using money management and budgeting tools?
                                • Trend Application

                                  • A new approach to short-term finance
                                    • Helping people to see positive uses for credit
                                      • Generation Next will take a different approach to credit
                                      • Economic Outlook

                                        • Key points
                                          • Uncertainties continue to undermine the economic recovery…
                                            • Figure 9: UK GDP, Q1 2008-Q1 2013
                                          • … but there are some grounds for optimism
                                            • Savings ratio falls in the first quarter of 2013
                                              • Figure 10: Saving ratio, Q1 2007-Q1 2013
                                            • Wage growth stagnation has eroded spending power
                                              • Figure 11: RPI and weekly average earnings. 2008-13
                                            • Unemployment rate stable at around 8%
                                              • Figure 12: UK headline unemployment rate, 2007-13
                                          • Consumer Financial Wellbeing

                                            • Key points
                                              • Little change in consumer financial health
                                                • Figure 13: Trend in consumer financial situation, June 2009- June 2013
                                              • Most people are treading water…
                                                • Figure 14: Trend in financial situation compared to a year ago, December 2011- June 2013
                                              • … but are less anxious about the future
                                                • Figure 15: Trends in consumer sentiment for the coming year, June 2009-June 2013
                                            • Consumer Credit Lending

                                              • Key points
                                                • Consumer credit lending continues to pick up
                                                  • Figure 16: Gross and net unsecured lending to individuals, January 2004-May 2013
                                                • Credit card spending continues to edge upwards
                                                  • Figure 17: Gross and net credit card lending, 2006-12 (seasonally adjusted)
                                                • Demand for other consumer credit begins to recover
                                                  • Figure 18: Gross and net other consumer credit lending (excluding student loans), 2006-12 (seasonally adjusted)
                                              • Mortgage Market Lending

                                                • Key points
                                                  • Mortgage lending flat in 2012…
                                                    • Figure 19: Gross and net mortgage lending, 2007-12 (seasonally adjusted)
                                                  • … but some signs up an upturn in early 2013
                                                    • Housing equity withdrawal remains in negative territory
                                                      • Figure 20: Housing equity withdrawal, 2006-12
                                                  • Write-offs, Repossessions and Arrears

                                                    • Key points
                                                      • Mortgage arrears and repossessions level off…
                                                        • Figure 21: Mortgage arrears and repossessions, Q1 2009-Q1 2013
                                                      • … but forbearance could be masking payment difficulties
                                                        • Interest-only time bomb
                                                          • Loan write-offs also on the decline
                                                            • Figure 22: Write-offs of loans to individuals, 2007-12
                                                          • Individual insolvencies in decline
                                                            • Figure 23: The number of individual insolvencies in England and Wales, by type, Q1 20043-Q1 2-13
                                                        • Consumer Segmentation – Attitudes Towards Debt and Credit

                                                          • Key points
                                                            • Negative attitudes towards debt persist
                                                              • Figure 24: Attitudes towards borrowing money and debt, April 2013
                                                            • The financially secure more likely to acknowledge the positive uses of credit
                                                              • Dividing the online population by attitudes towards credit and debt
                                                                • Figure 25: Consumer segmentation, April 2013
                                                              • Sophisticated financial planners
                                                                • 32% of online population
                                                                  • Demographic traits
                                                                    • Marketing perspective
                                                                      • Concerned but responsible credit users
                                                                        • 37% of online population
                                                                          • Demographic traits
                                                                            • Marketing perspective
                                                                              • Anti-credit critics
                                                                                • 14% of online population
                                                                                  • Demographic traits
                                                                                    • Marketing perspective
                                                                                      • Inattentive credit users
                                                                                        • 17% of the online population
                                                                                          • Demographic traits
                                                                                            • Marketing perspective
                                                                                              • Figure 26: Agreement with attitudes towards borrowing money and debt, by consumer segmentation, April 2013
                                                                                          • Credit Ownership

                                                                                            • Key points
                                                                                              • Most people owe money on some form of credit
                                                                                                • Figure 27: Types of credit on which money is owed, 2011- 13
                                                                                              • Indications that more people are using consumer credit
                                                                                                • Payday loans are gaining traction in the consumer credit market…
                                                                                                  • … but are facing growing scrutiny and regulatory intervention
                                                                                                    • Inattentive credit users are more likely to use payday loans
                                                                                                      • Figure 28: Types of credit on which money is owed, by consumer typologies, April 2013
                                                                                                    • More than a quarter owe money on three or more types of credit
                                                                                                      • Figure 29: Number of different types of credit on which money is owed, April 2013
                                                                                                      • Figure 30: Types of credit on which money is owed, by number of types of credit on which money is owed, April 2013
                                                                                                    • Multi-credit users are more likely to spend money without worrying
                                                                                                      • Figure 31: Agreement with attitudes towards borrowing money and debt, by number of different types of credit on which money is owed, April 2013
                                                                                                  • Level of Outstanding Unsecured Credit

                                                                                                    • Key points
                                                                                                      • Unsecured debt balances – some movement at the margins
                                                                                                        • Figure 32: Level of outstanding unsecured debt, 2011-13
                                                                                                      • Most unsecured credit borrowers are managing their debts
                                                                                                        • Figure 33: Current financial position by the level of outstanding unsecured debt, April 2013
                                                                                                      • Unsecured debts are higher among mortgage holders
                                                                                                        • Higher borrowers are more likely to see use of credit as acceptable
                                                                                                          • Figure 34: Agreement with attitudes towards borrowing money and debt, by level of outstanding unsecured debt, April 2013
                                                                                                      • Change in Personal Debt Levels

                                                                                                        • Key points
                                                                                                          • Nearly two fifths have increased debts over the last three years
                                                                                                            • Figure 35: Change in debt levels over the last three years, April 2013
                                                                                                          • Who has taken on debt?
                                                                                                            • And who has reduced their debt burden?
                                                                                                              • Reducing debt and improving financial well-being
                                                                                                                • Figure 36: Change in debt levels over the last three years, by financial situation compared to a year ago, April 2013
                                                                                                              • Impetus to reduce debts across the spectrum of credit balances
                                                                                                                • Figure 37: Change in debt levels over the last three years, by level of outstanding unsecured debt, April 2013
                                                                                                            • Level of Comfort with Personal Debt

                                                                                                              • Key points
                                                                                                                • Half of all credit holders are comfortable with their debts
                                                                                                                  • Figure 38: Level of comfort with level of debt, April 2013
                                                                                                                • Anxiety increases among those with unsecured debts of more than £3,000
                                                                                                                  • Figure 39: Level of comfort with level of debt, by level of outstanding unsecured debt, April 2013
                                                                                                                • Escalating debts also lead to increased discomfort
                                                                                                                  • Figure 40: Level of comfort with level of debt, by change in debt levels over the last three years, April 2013
                                                                                                                • Multi-credit holders are more likely to have concerns over debts
                                                                                                                  • Figure 41: Level of comfort with level of debt, by number of different types of credit on which money is owed, April 2013
                                                                                                                • Sophisticated credit users are the most comfortable with debts
                                                                                                                  • Figure 42: Level of comfort with level of debt, by consumer segmentation, April 2013
                                                                                                              • Appetite for Borrowing/Using Credit

                                                                                                                • Key points
                                                                                                                  • A fifth expect to use credit over the next 12 months
                                                                                                                    • Figure 43: Expected use of credit over the next 12 months, April 2013
                                                                                                                  • Under-35s are much more likely to be planning to borrow money in the next year
                                                                                                                    • Figure 44: People who expect to use credit in the next 12 months, by age group, April 2013
                                                                                                                  • Most expected borrowers already have unsecured debts
                                                                                                                    • Figure 45: Types of credit on which money is owed, by expected use of credit over the next 12 months, April 2013
                                                                                                                  • Expected borrowers have average levels of unsecured debt
                                                                                                                    • Figure 46: Level of outstanding unsecured debt, by expected use of credit over the next 12 months, April 2013
                                                                                                                    • Figure 47: Expected use of credit over the next 12 months, by number of different types of credit on which money is owed, April 2013
                                                                                                                  • Sophisticated financial planners are the most open to borrowing in the next year
                                                                                                                    • Figure 48: Expected use of credit over the next 12 months, by target groups, April 2013
                                                                                                                • Use of and Interest in Money Management Services

                                                                                                                  • Key points
                                                                                                                    • Accessing credit file tops list of money management activities undertaken…
                                                                                                                      • Figure 49: Consumer usage of selected money management and budgeting tools, April 2013
                                                                                                                    • … but credit providers face a challenge to gain repeat business
                                                                                                                      • Figure 50: Proportion of users of selected money management and budgeting tools who would and wouldn’t use the service in future, April 2013
                                                                                                                    • Online budgeting tools are growing in popularity
                                                                                                                      • 50% are interested in using money management tools from their bank
                                                                                                                        • Figure 51: Consumer interest in using money management and budgeting tools, April 2013
                                                                                                                        • Figure 52: Interest in using online money management/budgeting tools, by age group, April 2013
                                                                                                                      • Keeping young adults engaged is the challenge for providers of budgeting tools
                                                                                                                        • Role of face-to-face debt advice should not be overlooked
                                                                                                                        • Appendix – Consumer Segmentation – Attitudes Towards Debt and Credit

                                                                                                                            • Figure 53: Agreement with the statements ‘I don’t like the idea of being in debt’ and ‘It is irresponsible to rely on credit’, by demographics, April 2013
                                                                                                                            • Figure 54: Agreement with the statements ‘Borrowing money should be a last resort’ and ‘It is better to save up for something rather than rely on credit’, by demographics, April 2013
                                                                                                                            • Figure 55: Agreement with the statements ‘Borrowing money can be a useful way to protect savings’ and ‘I tend to spend money now and worry about it later’, by demographics, April 2013
                                                                                                                            • Figure 56: Agreement with the statements ‘I like to keep a close eye on my finances’ and ‘Using credit is acceptable on some occasions’, by demographics, April 2013
                                                                                                                            • Figure 57: Agreement with the statements ‘It makes sense to use credit cards to pay for large purchases’ and ‘Credit can offer more flexibility when managing household finances’, by demographics, April 2013
                                                                                                                          • Consumer Segmentation
                                                                                                                            • Figure 58: Consumer Segmentation, by demographics, April 2013
                                                                                                                            • Figure 59: Expected use of credit over the next 12 months, by consumer segmentation, April 2013
                                                                                                                        • Appendix – Credit Ownership

                                                                                                                            • Figure 60: Types of credit on which money is owed, by demographics, April 2013
                                                                                                                            • Figure 61: Types of credit on which money is owed, by demographics, April 2013 (continued)
                                                                                                                            • Figure 62: Types of credit on which money is owed, by demographics, April 2013 (continued)
                                                                                                                            • Figure 63: Number of different types of credit on which money is owed, by demographics, April 2013
                                                                                                                        • Appendix – Level of Outstanding Unsecured Credit

                                                                                                                            • Figure 64: Level of outstanding unsecured debt, by demographics, April 2013
                                                                                                                            • Figure 65: Level of outstanding unsecured debt, by demographics, April 2013 (continued)
                                                                                                                            • Figure 66: Types of credit on which money is owed, by level of outstanding unsecured debt, April 2013
                                                                                                                            • Figure 67: Level of outstanding unsecured debt, by number of different types of credit on which money is owed, April 2013
                                                                                                                        • Appendix – Change in Personal Debt Levels

                                                                                                                            • Figure 68: Change in debt levels over the last three years, by demographics, April 2013
                                                                                                                            • Figure 69: Types of credit on which money is owed, by change in debt levels over the last three years, April 2013
                                                                                                                            • Figure 70: Change in debt levels over the last three years, by number of different types of credit on which money is owed, April 2013
                                                                                                                        • Appendix – Level of Comfort with Personal Debt

                                                                                                                            • Figure 71: Level of comfort with level of debt, by demographics, April 2013
                                                                                                                            • Figure 72: Level of comfort with level of debt, by demographics, April 2013 (continued)
                                                                                                                            • Figure 73: Types of credit on which money is owed, by level of comfort with level of debt, April 2013
                                                                                                                            • Figure 74: Types of credit on which money is owed, by level of comfort with level of debt, April 2013 (continued)
                                                                                                                        • Appendix – Appetite for Borrowing/Using Credit

                                                                                                                            • Figure 75: Expected use of credit over the next 12 months, by demographics, April 2013
                                                                                                                        • Appendix – Use of and Interest in Money Management Services

                                                                                                                            • Figure 76: Usage of and appetite for money management and budgeting tools, April 2013
                                                                                                                            • Figure 77: Usage of and appetite for money management and budgeting tools, by level of comfort with level of debt, April 2013
                                                                                                                            • Figure 78: Usage of and appetite for regular access to your credit report/file, by demographics, April 2013
                                                                                                                            • Figure 79: Usage of and appetite for one-off access to your credit report/file, by demographics, April 2013
                                                                                                                            • Figure 80: Usage of and appetite for online money management/budgeting tool (from your bank), by demographics, April 2013
                                                                                                                            • Figure 81: Usage of and appetite for online money management/budgeting tool (not from your bank), by demographics, April 2013
                                                                                                                            • Figure 82: Usage of and appetite for advice from a debt counselling service, by demographics, April 2013
                                                                                                                            • Figure 83: Usage of and appetite for face-to-face advice about money management and budgeting from your bank/building society, by demographics, April 2013
                                                                                                                            • Figure 84: Usage of and appetite for mobile apps for money management/budgeting, by demographics, April 2013
                                                                                                                            • Figure 85: Usage of and appetite for money management classes or workshops, by demographics, April 2013
                                                                                                                            • Figure 86: Usage of and appetite for peer-to-peer advice such as online discussion boards, by demographics, April 2013

                                                                                                                        Companies Covered

                                                                                                                        • Citizens Advice Bureau
                                                                                                                        • Moneysavingexpert

                                                                                                                        Consumer Attitudes Towards Debt - UK - July 2013

                                                                                                                        £2,195.00 (Excl.Tax)