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Consumer Attitudes Towards Debt - UK - July 2014

“A good, fairly priced payment protection product should be a positive proposition for most consumers, especially those vulnerable to difficulty, such as people with poor health, insecure employment or limited finances."

                                                                                      – Rich Shepherd, Research Analyst – Financial Services

This report looks at the following issues:

  • Informal borrowers highlight exclusion from traditional lending
  • Consumers can be judgmental about other people’s approach to debt
  • Rising interest, rising worries?

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Table of contents

  1. Introduction

      • Definitions
        • Abbreviations
          • Fieldwork methodology
          • Executive Summary

              • Trends in lending
                • Strong growth in consumer credit throughout 2013
                  • Figure 1: Gross and net unsecured lending to individuals, excluding student loans, January 2005 – April 2014
                • Housing market exploded into life last year
                  • Figure 2: Gross and net secured lending advances, 2009-13 (not seasonally adjusted)
                • Credit ownership
                  • Seven in ten have at least one form of debt
                    • Figure 3: Credit product ownership, May 2014
                  • Nearly a fifth owe more than £5,000 of unsecured debt
                    • Figure 4: Level of outstanding unsecured debt, May 2014
                  • Level of comfort with debt and appetite for credit
                    • Most people are comfortable with their current debts
                      • Figure 5: Level of comfort with amount of debt, May 2014
                    • Three quarters are comfortable with their repayments
                      • Figure 6: Level of comfort with debt repayments, May 2014
                    • Less than a fifth plan to borrow next year
                      • Figure 7: Borrowing plans for the next 12 months, May 2014
                    • Attitudes towards credit and debt
                      • Consumers are still wary of debt
                        • Figure 8: Preference to save or pay off debt, May 2014
                        • Figure 9: Preference for shorter or longer repayment schedules, May 2014
                      • Consumers believe lenders should give more assistance to struggling borrowers
                        • Figure 10: Attitudes towards debt management, May 2014
                      • What we think
                      • Issues and Insights

                          • Informal borrowers highlight exclusion from traditional lending
                            • The facts
                              • The implications
                                • Consumers can be judgmental about other people’s approach to debt
                                  • The facts
                                    • The implications
                                      • Rising interest, rising worries?
                                        • The facts
                                          • The implications
                                          • Trend Application

                                            • Be proactive to help borrowers help themselves
                                              • Credit can fund life events, not just delay them
                                                • Accessibility is key to getting advice to young people
                                                • Economic Outlook

                                                  • Key points
                                                    • Sustained growth finally takes hold
                                                      • Figure 11: Quarterly change in GDP, 2009 Q1 – 2014 Q1
                                                    • Wages still squeezed despite falling inflation
                                                      • Figure 12: Annual % change in average weekly earnings, CPI and RPI, March 2009 – May 2014
                                                    • Consumer appetite to save increases but remains low
                                                      • Figure 13: Savings ratio, 2008 Q1 – 2013 Q4
                                                    • Encouraging drop in unemployment rate
                                                      • Figure 14: Total UK unemployment rate, January 2008 – April 2014
                                                    • Low interest rates have increased appeal of personal loans
                                                      • Figure 15: UK interest rates, January 2009 – March 2014
                                                    • Rate rises on the horizon
                                                    • Consumer Financial Wellbeing

                                                      • Key points
                                                        • Most people are getting by, but there’s no improvement at the bottom
                                                          • Figure 16: Trend in consumer financial situation, June 2009-June 2014
                                                        • One in four people’s finances improved in the last year
                                                          • Figure 17: Trend in consumer finances compared to a year ago, June 2009-June 2014
                                                        • Most expect to be OK over the next year
                                                          • Figure 18: Trend in consumer sentiment for the coming year, June 2009 – June 2014
                                                      • Consumer Credit Lending

                                                        • Key points
                                                          • Gross lending on the rise
                                                            • Figure 19: Gross and net unsecured lending to individuals, excluding student loans, January 2005 – April 2014
                                                          • Big growth in net credit card lending
                                                            • Figure 20: Gross and net credit card lending, 2009-13 (not seasonally adjusted)
                                                          • Other consumer credit explodes back into life
                                                            • Figure 21: Gross and net other consumer credit lending (excluding student loans), 2009-13 (not seasonally adjusted)
                                                        • Mortgage Market Lending

                                                          • Key points
                                                            • Big growth in gross mortgage lending
                                                              • Figure 22: Gross and net secured lending advances, 2009-13 (not seasonally adjusted)
                                                            • House prices are up, but so are approvals
                                                              • Figure 23: Monthly mortgage approvals for home-buying, January 2009 – April 2014
                                                            • Housing equity withdrawal is still unfashionable
                                                              • Figure 24: Housing equity withdrawal, December 2005 – December 2013
                                                            • MMR could put a brake on growth
                                                            • Write-offs, Repossessions and Arrears

                                                              • Key points
                                                                • Mortgage arrears and repossessions steadily fall
                                                                  • Figure 25: Number of mortgages in arrears of 2.5% or more and repossessions, Q1 2009 – Q1 2014
                                                                • Increase in mortgage write-offs bucks the trend
                                                                  • Figure 26: Value of write-offs to loans to individuals, 2009-13
                                                                • Decrease in insolvencies continues
                                                                  • Figure 27: The number of individual insolvencies in England and Wales, by type, Q1 2008 – Q1 2013
                                                              • Credit Product Ownership

                                                                • Key points
                                                                  • Credit cards are the most commonly-held credit products
                                                                    • Figure 28: Credit product ownership, May 2014
                                                                  • Debt ownership reduces with age
                                                                    • Figure 29: Credit product ownership, by age, May 2014
                                                                    • Figure 30: Mortgage ownership, by age, May 2014
                                                                  • A quarter have four or more outstanding debts
                                                                    • Figure 31: Number of different types of credit on which money is owed, May 2014
                                                                    • Figure 32: Credit product ownership, by number of types of credit held, May 2014
                                                                • Level of Outstanding Unsecured Credit

                                                                  • Key points
                                                                    • Debt levels are largely unchanged
                                                                      • Figure 33: Level of outstanding debt, 2012-14
                                                                    • Most owe less than £3,000
                                                                      • Mortgages are more common among those with larger debts
                                                                        • Figure 34: Ownership of selected credit products, under £1,000 owed vs over £1,000 owed, May 2014
                                                                    • Level of Comfort with Personal Debt

                                                                      • Key points
                                                                        • Most people are comfortable with what they owe…
                                                                          • Figure 35: Level of comfort with amount of debt, May 2014
                                                                        • … and things have improved since last year
                                                                          • Figure 36: Level of comfort with amount of debt, 2013-14
                                                                        • Nearly half with informal debts are uncomfortable with their debt
                                                                          • Figure 37: Level of comfort with personal debt, by debt product ownership, May 2014
                                                                        • Securities stave off discomfort
                                                                          • Student loan-holders are less comfortable than the average
                                                                            • Discomfort with debt peaks at 35-44…
                                                                              • Figure 38: People who are uncomfortable with the amount that they owe, by age group, May 2014
                                                                            • … and increases with the more debt that is held
                                                                              • Figure 39: Level of comfort with personal debt, by level of outstanding unsecured debt, May 2014
                                                                          • Level of Comfort with Debt Repayments

                                                                            • Key points
                                                                              • Over three quarters are comfortable with their repayments
                                                                                • Figure 40: Level of comfort with debt repayments, May 2014
                                                                              • Having any significant savings provides peace of mind
                                                                                • Figure 41: Level of comfort with debt repayments, by amount held in savings and investments, May 2014
                                                                              • Higher debts, higher worries
                                                                                • Figure 42: Level of outstanding debt, by level of comfort with debt repayments, May 2014
                                                                              • Eight in ten mortgage holders are comfortable with their debt repayments…
                                                                                • Figure 43: Level of comfort with debt repayments, by debt product ownership, May 2014
                                                                              • ... but less informal borrowers feel less content
                                                                                • A fifth of those struggling with payments are comfortable with their overall debt
                                                                                  • Figure 44: Level of comfort with debt repayments, by level of comfort with amount of outstanding debt, May 2014
                                                                              • Appetite for Borrowing/Using Credit

                                                                                • Key points
                                                                                  • Appetite for borrowing remains low
                                                                                    • Figure 45: Borrowing plans for the next 12 months, May 2014
                                                                                  • Younger people are more likely to borrow
                                                                                    • Figure 46: Percentage of consumers who are likely to borrow in the next 12 months, by age, May 2014
                                                                                  • Higher appetite among well-off and hard-up
                                                                                    • Borrowers with high-cost debts are most likely to borrow again
                                                                                      • Figure 47: Borrowing plans for the next 12 months, by debt product ownership, May 2014
                                                                                    • A fifth of likely borrowers are already uncomfortable with their debt…
                                                                                      • Figure 48: Consumers who said “Yes it is likely that I will borrow money and/or use new credit products in the next 12 months”, by level of comfort with personal debt, May 2014
                                                                                    • Credit cards top of the list of credit products that people are likely to use
                                                                                      • Figure 49: Credit products that people plan to borrow from in the next 12 months, May 2014
                                                                                  • Attitudes towards Money Management

                                                                                    • Key points
                                                                                      • Likely borrowers are still generally wary of debt
                                                                                        • Figure 50: Attitudes towards debt and money management, May 2014
                                                                                      • Plans can wait, debt comes first
                                                                                        • Debt is still a taboo for many…
                                                                                          • Figure 51: Preference for borrowing from informal or formal lenders, by age group, May 2014
                                                                                      • Attitudes towards Debt Management

                                                                                        • Key points
                                                                                          • Consumers want lenders to give more support…
                                                                                            • Figure 52: Attitudes towards debt management, May 2014
                                                                                          • … but they expect debtors to pay what they owe
                                                                                            • Borrowers are confident they’d know what to do in difficulty
                                                                                              • Figure 53: Awareness of where to find professional advice/guidance about debt issues, by age, May 2014
                                                                                            • People should insure their debt, but don’t
                                                                                              • Consumers are split on what their priority should be
                                                                                              • Appendix – Credit Product Ownership

                                                                                                  • Figure 54: Credit product ownership, by demographics, May 2014
                                                                                                  • Figure 55: Credit product ownership (continued), by demographics, May 2014
                                                                                                  • Figure 56: Credit product ownership (continued), by demographics, May 2014
                                                                                                • Repertoire of credit product ownership
                                                                                                  • Figure 57: Number of credit products owned, by demographics, May 2014
                                                                                              • Appendix – Level of Outstanding Unsecured Debt

                                                                                                  • Figure 58: Levels of outstanding unsecured debt, by demographics, May 2014
                                                                                                  • Figure 59: Levels of outstanding unsecured debt (continued), by demographics, May 2014
                                                                                                  • Figure 60: Levels of outstanding unsecured debt (continued), by demographics, May 2014
                                                                                              • Appendix – Level of Comfort with Personal Debt

                                                                                                  • Figure 61: Level of comfort with personal debt, by demographics, May 2014
                                                                                                  • Figure 62: Level of comfort with personal debt, by demographics, May 2014 (continued)
                                                                                              • Appendix – Level of Comfort with Debt Repayments

                                                                                                  • Figure 63: Level of comfort with debt repayments, by demographics, May 2014
                                                                                                • Level of comfort with debt repayments, by credit product ownership
                                                                                                  • Figure 64: Level of comfort with debt repayments, by credit product ownership, May 2014
                                                                                                  • Figure 65: Level of comfort with debt repayments, by credit product ownership (continued), May 2014
                                                                                              • Appendix – Appetite for Borrowing/Using Credit

                                                                                                  • Figure 66: Borrowing plans for the next 12 months, by demographics, May 2014
                                                                                                  • Figure 67: Credit products that people plan to borrow from in the next 12 months, by demographics, May 2014
                                                                                                  • Figure 68: Credit products that people plan to borrow from in the next 12 months (continued), by demographics, May 2014
                                                                                                  • Figure 69: Credit products that people plan to borrow from in the next 12 months (continued), by demographics, May 2014
                                                                                                • Level of comfort with debt repayments, by borrowing plans for the next 12 months
                                                                                                  • Figure 70: Level of comfort with debt repayments, by borrowing plans for the next 12 months, May 2014
                                                                                              • Appendix – Attitudes towards Money Management

                                                                                                  • Figure 71: Attitudes towards debt – ‘I would prioritise saving over paying off debt’ versus ‘I would prioritise paying off debt over saving’, by demographics, May 2014
                                                                                                  • Figure 72: Attitudes towards debt – ‘I would feel comfortable buying something on credit rather than saving up for it’ versus ‘I would feel uncomfortable buying something on credit rather than saving up for it’, by demographics, May 2014
                                                                                                  • Figure 73: Attitudes towards debt – ‘I would prefer to make larger monthly/weekly repayments to pay back debt/credit as quickly as possible’ versus ‘I would prefer to make smaller weekly/monthly repayments over a longer period of time’, by demographics, May 2014
                                                                                                  • Figure 74: Attitudes towards debt – ‘I would feel more comfortable borrowing money from family or friends than a formal lender’ versus ‘I would feel more comfortable borrowing money from a formal lender than from family or friends’, by demographics, May 2014
                                                                                                  • Figure 75: Attitudes towards debt – ‘I would be happy to make major commitments or decisions without clearing my debts/credit first’ versus ‘I wouldn’t be happy to make any major commitments or decisions without clearing my debits/credit first’, by demographics, May 2014
                                                                                                  • Figure 76: Attitudes towards debt – ‘I am generally wary of taking out debt and credit’ versus ‘I am not generally wary of taking out debt/credit’, by demographics, May 2014
                                                                                              • Appendix – Attitudes towards Debt Management

                                                                                                  • Figure 77: Agreement with the statement ‘I think it’s unfair to expect people to repay any debts if they’re no longer able to afford it’, by demographics, May 2014
                                                                                                  • Figure 78: Agreement with the statement ‘It is irresponsible to not take precautions such as an insurance policy to cover your debts in the event of being unable to pay them’, by demographics, May 2014
                                                                                                  • Figure 79: Agreement with the statement ‘I know where I could go for professional advice if I needed help and guidance about debt issues’, by demographics, May 2014
                                                                                                  • Figure 80: Agreement with the statement ‘I would rather damage my credit rating by missing a debt repayment than significantly change my lifestyle to meet my commitments’, by demographics, May 2014
                                                                                                  • Figure 81: Agreement with the statement ‘If I could only afford to pay one, I would rather keep up with my debt repayments than pay my utility bills’, by demographics, May 2014
                                                                                                  • Figure 82: Agreement with the statement ‘I would be willing to pay for debt management services’, by demographics, May 2014
                                                                                                  • Figure 83: Agreement with the statement ‘credit companies should provide more assistance for customers in difficulty’, by demographics, May 2014

                                                                                              Companies Covered

                                                                                              • Student Loans Company Ltd

                                                                                              Consumer Attitudes Towards Debt - UK - July 2014

                                                                                              £2,195.00 (Excl.Tax)