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Consumer Attitudes Towards Debt - UK - July 2015

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

This report discusses the following key issues:

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

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Table of contents

  1. Introduction

      • Definitions
        • Abbreviations
        • Executive Summary

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

            • Online-only brands could challenge high street lenders
              • The facts
                • The implications
                  • People are becoming more comfortable with long-term unsecured debt
                    • The facts
                      • The implications
                      • The Market – What You Need to Know

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                                                      Companies Covered

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                                                                      Consumer Attitudes Towards Debt - UK - July 2015

                                                                      US $2,842.31 (Excl.Tax)