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Consumer Attitudes Towards Debt - UK - July 2016

“Lending has grown rapidly in recent years, driven by rising consumer confidence and the cheap availability of credit. However, consumer confidence has taken a knock following the UK’s decision to leave the EU, which will result in a more cautious approach towards personal finances. In the short term while the terms of Brexit are determined, a period of uncertainty will lead to reduced demand for credit to pay for big ticket items – especially those purchases that can be delayed until people perceive there is more economic stability.”
– Jessica Galletley, Financial Services Analyst

This report discusses the following key topics:

  • Family and friends growing as a source of credit
  • Opportunity for a resurgence of PPI?
  • Postponed life-events will increase demand for credit later in life

This Report presents Mintel’s exclusive consumer research into consumer attitudes towards debt. It examines how views are changing and the types of credit people are turning to. The Report looks at how much people owe and where, as well as how consumers are managing their debt and expected sources of credit in the future. It explores the macroeconomic drivers behind consumer behaviour, and provides insight into consumer relationships with credit in the future.

This Report examines both secured and unsecured lending. For the purposes of the Report, these two types of credit are defined as follows:

Secured lending – lending that is secured against a property, ie the ownership of the property is at risk if repayments are not made to clear the debt. This is primarily mortgages used to purchase properties, but also includes homeowner loans, where homeowners borrow additional funds secured against their home.

Unsecured lending – any type of lending that does not fit the definition of secured lending, ie lending that is not secured against a property. This includes a wide range of consumer credit products such as credit cards, personal loans and current account overdraft facilities. Please note that this definition also includes car finance plans, which can be secured against the vehicle being purchased.

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Table of contents

  1. Overview

    • What you need to know
      • Definitions
      • Executive Summary

          • The market
            • Lending at highest level since financial crisis…
              • …but some lessening of demand expected in the short term
                • Figure 1: Gross and net (amount outstanding) unsecured consumer credit lending, excluding the Student Loans Company, (includes credit cards), quarterly lending, 2009-15
              • Mortgage lending at highest point since 2008…
                • …but EU referendum result will slow growth during 2016
                  • Figure 2: Total secured lending, by gross and net advances, 2010-15 (not seasonally adjusted)
                • The consumer
                  • Nearly two thirds have some form of debt
                    • Figure 3: Ownership of credit products, May 2016
                  • Majority feel comfortable with their repayments…
                    • Figure 4: Level of comfort with debt repayments, 2014-16
                  • Most people will use their salary to repay debt
                    • Figure 5: Expected source of funds for debt repayments, May 2016
                  • Credit is seen as a last resort
                    • Figure 6: Agreement with attitudes towards managing and borrowing money, May 2016
                  • Credit most likely to be used to fund unexpected expenses
                    • Figure 7: Any expected reason for taking out credit products in the future, May 2016
                  • What we think
                  • Issues and Insights

                    • Family and friends growing as a source of credit
                      • The facts
                        • The implications
                          • Opportunity for a resurgence of PPI?
                            • The facts
                              • The implications
                                • Postponed life-events will increase demand for credit later in life
                                  • The facts
                                    • The implications
                                    • The Market – What You Need to Know

                                      • Growth in real disposable income lags behind GDP
                                        • Consumer confidence rising steadily
                                          • Lending at highest level since financial crisis
                                            • Mortgage lending at highest point since 2008
                                              • Decline in write-offs stalls
                                              • Economic Outlook

                                                • Growth in real disposable income lags behind GDP
                                                  • Figure 8: Gross domestic product, quarterly growth rate (seasonally adjusted), 2009-16
                                                  • Figure 9: GDP per head at current market prices, and real household disposable income per head, 2011-15
                                                • Consumers are saving less in relation to their income
                                                  • Figure 10: Household saving ratio, 2009-15
                                                • A cut to base rate will keep borrowing rates low
                                                  • Figure 11: UK interest rates, January 2009-May 2016
                                                • Unemployment at lowest level since 2005
                                                  • Figure 12: Total UK unemployment rate among people aged 16+, quarterly, January 2010-March 2016
                                              • Consumer Financial Situation

                                                • Financial well-being has continued to edge upwards
                                                    • Figure 13: The financial well-being index, January 2009-July 2016
                                                  • People feel better off than they did last year
                                                      • Figure 14: The recovery index, July 2011-July 2016
                                                    • Financial confidence also moves upwards…
                                                      • …but Brexit vote increases level of uncertainty
                                                          • Figure 15: Financial Confidence Index, January 2009-July 2016
                                                      • Consumer Credit Lending

                                                        • Consumer credit lending at highest level since before financial crisis
                                                            • Figure 16: Gross and net (amount outstanding) unsecured consumer credit lending, excluding the Student Loans Company, (includes credit cards), quarterly lending, 2009-15
                                                          • ‘Other’ consumer credit lending sees resurgence
                                                              • Figure 17: Consumer credit lending (excluding student loans), 2009-15
                                                          • Mortgage Lending

                                                            • Mortgage lending at highest point since 2008
                                                              • Figure 18: Total secured lending, by gross and net advances, 2010-15 (not seasonally adjusted)
                                                            • Mortgage approvals peak at the start of 2016
                                                              • Figure 19: Number of quarterly mortgage approvals seasonally adjusted, by type, January 2010-March 2016
                                                          • Write-offs, Repossessions and Arrears

                                                            • Decline in write-offs stalls
                                                              • Figure 20: Value of write-offs to loans to individuals, 2010-15 (not seasonally adjusted)
                                                            • Arrears and repossessions remain low
                                                              • Figure 21: Mortgage arrears (2.5% or more of mortgage balance) and repossessions, January 2010-March 2016
                                                            • Insolvencies continue to fall
                                                              • Figure 22: Individual insolvencies in England and Wales, by type, 2010-15 (not seasonally adjusted)
                                                            • 36% decline in debtor’s petitions
                                                              • Figure 23: Individual bankruptcies in England and Wales, by petition type, 2010-15 (not seasonally adjusted)
                                                          • The Consumer – What You Need to Know

                                                            • Nearly two thirds have some form of debt
                                                              • Debt remains under control
                                                                • Most people will use their salary to repay debt
                                                                  • Credit is seen as a last resort
                                                                    • Credit most likely to be used to fund unexpected expenses
                                                                    • Credit Product Ownership

                                                                      • Nearly two thirds have some form of debt
                                                                        • Figure 24: Ownership of credit products, May 2016
                                                                      • Credit cards are the most popular form of credit
                                                                        • Informal borrowing plays a key role for some groups
                                                                          • 35-44-year-olds most likely to have debt
                                                                            • Figure 25: Ownership of credit products, by age, May 2016
                                                                          • Most people have three or fewer credit products
                                                                            • Figure 26: Repertoire of credit products, May 2016
                                                                          • Overdrafts and loans are secondary products
                                                                            • Figure 27: Repertoire of credit products, by type of credit products, May 2016
                                                                        • Amount Owed on Unsecured Credit Products

                                                                          • Debt remains under control
                                                                            • Figure 28: Amount owed on unsecured credit products, 2012-16
                                                                          • Higher earners have higher levels of debt
                                                                            • Figure 29: Amount owed on unsecured credit products, by household income, May 2016
                                                                        • Level of Comfort with Debt Repayments

                                                                          • Majority feel comfortable with their repayments…
                                                                            • Figure 30: Level of comfort with debt repayments, May 2016
                                                                          • …but one in five is struggling
                                                                            • Lending criteria has relaxed over the last year
                                                                              • Figure 31: Level of comfort with debt repayments, 2014-16
                                                                            • Unsecured debt causes more worry
                                                                              • Over-65s are most likely to increase repayments
                                                                                • Figure 32: Level of comfort with debt repayments, by age, May 2016
                                                                            • Expected Repayment Method

                                                                              • Most people will use their salary to repay debt
                                                                                • People use credit over dipping into savings
                                                                                  • Figure 33: Expected source of funds for debt repayments, May 2016
                                                                                • Paying for debt in retirement
                                                                                    • Figure 34: Expected source of funds for debt repayments, by age, May 2016
                                                                                  • Family and friends are a last resort when borrowing
                                                                                    • Figure 35: Expected source of funds for debt repayments, by level of comfort with debt repayment, May 2016
                                                                                  • Repayment strategies by level of debt
                                                                                    • Figure 36: Expected source of funds for debt repayments, by amount owed, May 2016
                                                                                • Attitudes towards Borrowing

                                                                                  • Credit is seen as a last resort
                                                                                    • Figure 37: Attitudes towards managing and borrowing money, May 2016
                                                                                  • Majority of people think its socially acceptable to have debt
                                                                                    • Three in five think it’s important to know your personal credit rating
                                                                                      • Most are happy to have products with different providers
                                                                                        • Online platforms can help those who are struggling
                                                                                          • Figure 38: Agreement with the statement ‘I would be interested in using an online platform to help manage my debt’, by level of comfort with debt repayments, May 2016
                                                                                      • Future Use of Credit Products

                                                                                        • Credit most likely to fund unexpected expenses
                                                                                          • Figure 39: Future use of credit products, May 2016
                                                                                        • Credit cards are the go-to form of credit
                                                                                          • Intended loan usage remains low despite record rates
                                                                                            • Younger people more likely to use credit
                                                                                              • Figure 40: Future use of credit products – ‘Any type of credit’, by age, May 2016
                                                                                          • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                              • Abbreviations
                                                                                                • Consumer research methodology

                                                                                                Companies Covered

                                                                                                To learn more about the companies covered in this report please contact us.

                                                                                                Consumer Attitudes Towards Debt - UK - July 2016

                                                                                                £2,195.00 (Excl.Tax)