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Consumers' Attitudes Towards Debt - UK - July 2010

  • Despite the severity of the recession only 3% of the population are really struggling to meet their financial commitments and may have missed at least one payment recently, equivalent to around 1.5 million adults. Younger adults and those on lower incomes are more likely to fall into this group.
  • Around 14 million describe their financial situation as comfortably off, with retirees and third agers more likely than average to fit this classification.
  • More than half of all adults have some type of credit on which they have outstanding debts, with almost three in ten owing money on more than one type of credit.
  • Consumers are evenly split over the impact of the recession on their spending habits. Almost two fifths believe they are now more careful about their spending, but the same proportion feel the downturn has had no effect.
  • For some of those who have enjoyed a relatively comfortable standard of living but have been unable or unwilling to build their savings, the recession has provided a wake-up call about the potential fragility of their financial situation.
  • Only 10% of adults agree that they have reduced their reliance on credit, although this is much higher among those who admit to relying on credit in order to fund major purchases.

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Table of contents

  1. Issues in the Market

      • Key issues for desk research
        • Abbreviations
        • Future Opportunities

          • Helping consumers to visualise the impact of debt
            • Educating the young about debt and money management
            • Market in Brief

              • Household debt continues to plateau
                • Figure 1: Outstanding lending to individuals, Q1 1993-Q1 2010
              • Mortgage lending falls by 43% in 2009
                • Demand for consumer credit remains weak
                  • Most people are getting by
                    • Figure 2: Statements describing current financial situation, April 2010
                  • Credit ownership – financial strugglers more likely to have unsecured debt
                    • Figure 3: Type of credit on which money is currently owed, April 2010
                  • Only a minority admit to being financially disorganised
                    • Figure 4: Statements on financial management, April 2010
                  • Consumers divided over the impact of the recession on spending
                    • Figure 5: Statements on the impact of the recession on attitudes towards saving, spending and managing money, April 2010
                • Household Debt in Context

                  • Key points
                    • Level of outstanding debt begins to plateau
                      • Figure 6: Outstanding lending to individuals, Q1 1993-Q1 2010
                    • Unsecured debt balances have fallen in recent months
                      • Figure 7: Growth in outstanding lending to individuals, Q1 2003-Q1 2010
                    • The burden of debt
                      • Figure 8: Outstanding lending to individuals as a proportion of PDI, 1993-2009
                  • The Changing Economic Environment

                    • Key points
                      • Tentative signs of economic recovery
                        • Figure 9: GDP quarterly percentage change, Q1 2004-Q1 2010
                      • Unemployment begins to slow…
                        • Figure 10: Number of unemployed people, Q1 1993-Q1 2010
                      • …but the outlook remains uncertain
                        • Bank rate helps to insulate consumers from recessionary pressures
                          • Figure 11: Bank of England base rate, three-month LIBOR and effective rate on new mortgages, January 2007-April 2010
                      • Consumer Context – The Changing Economic Environment

                        • Key points
                          • Debt repayment remains a financial priority
                            • Figure 12: Savings, investment, borrowing and debt repayment – consumers’ expected financial activity, quarterly indices, June 2002-March 2010
                          • Taking a more cautious approach to expenditure
                            • Figure 13: Changing attitudes towards money management, 2005-09
                          • A growing number are feeling the effects of the downturn…
                            • Figure 14: The impact of the economic downturn on consumers, April 2009-April 2010
                          • …but most remain positive about their prospects for the coming year
                            • Figure 15: Trends in consumer sentiment for the coming year, April 2009-April 2010
                        • The Over-Extended Consumer

                          • Key points
                            • Write-offs increase in 2009
                              • Figure 16: Quarterly write-offs of lending to individuals, May 2004-December 2009
                            • Mortgage arrears cases peaked in mid-2009
                              • Figure 17: Number of residential loan accounts to individuals in arrears, Q3 2008-Q1 2010
                            • Repossessions peak in Q1 2009
                              • Figure 18: Number of new possession cases, Q3 2008-Q1 2010
                            • Insolvency cases begin to level off
                              • Figure 19: Individual insolvencies in England and Wales, by quarter, Q1 2004-Q1 2010 (not seasonally adjusted)
                            • Helping the indebted
                              • New schemes launched to ease the pressure of debt
                                • Consumer Credit Directive – greater protection for consumers
                                  • New rules on credit and store cards
                                  • The Mortgage Market

                                    • Key points
                                      • Gross mortgage lending falls by 43% in 2009
                                        • Figure 20: Gross and net mortgage lending, January 2004-March 2010 (not seasonally adjusted)
                                      • Housing equity withdrawal remains in negative territory
                                        • Figure 21: Housing equity withdrawal (not seasonally adjusted), 1999-2009
                                      • Consumer confidence beginning to return to housing sector…
                                        • Figure 22: Expected house price movement over the next year, 2007-09
                                      • …but mortgage demand remains weak
                                        • Figure 23: Expected mortgage and property purchase activity, Q3/Q4 2002-Q1/Q2 2010
                                    • Consumer Credit

                                      • Key points
                                        • Demand for consumer credit continues to decline
                                          • Figure 24: Intended consumer credit activities, Q3/Q4 2002-Q1/Q2 2010
                                        • Gross credit card lending holds up despite the recession…
                                          • Figure 25: Gross and net credit card lending, 2005-10 (not seasonally adjusted)
                                        • …but appetite for other forms of consumer credit falls
                                          • Figure 26: Gross and net consumer credit (excluding credit card lending), 2005-10 (not seasonally adjusted)
                                      • The Consumer – Financial Situation

                                        • Key points
                                          • Note on consumer research
                                            • Only a minority are experiencing financial difficulty
                                                • Figure 27: Statements describing current financial situation, April 2010
                                              • Young adults are more likely to struggle with debt
                                                • Figure 28: Current financial situation, by gender, age and lifestage, April 2010
                                              • Family budgets also feel the strain
                                                • Older age groups enjoy a healthier financial picture
                                                  • Income is the main determinant of financial security
                                                    • Figure 29: Current financial situation, by socio-economic group and gross household income, April 2010
                                                • The Consumer – Credit Ownership

                                                  • Key points
                                                    • More than half of the population have some form of debt
                                                        • Figure 30: Type of credit on which money is currently owed, April 2010
                                                      • Three in ten rely on more than one source of credit
                                                        • Figure 31: Repertoire of type of credit on which money is owed, April 2010
                                                        • Figure 32: Type of credit on which money is owed, by repertoire of type of credit on which money is owed, April 2010
                                                      • Families are the most likely to rely on unsecured debt
                                                        • Figure 33: Outstanding credit, by gender, age and lifestage, April 2010
                                                      • The most affluent are the most likely to use credit
                                                        • Figure 34: Outstanding credit, by socio-economic group, gross household income and housing tenure, April 2010
                                                      • Unsecured debt contributes to financial difficulties
                                                        • Figure 35: Type of credit on which money is owed, by statements describing current financial situation, April 2010
                                                    • The Consumer – Level of Unsecured Debt

                                                      • Key points
                                                        • Most unsecured debt is below £5,000
                                                            • Figure 36: Amount owed on unsecured borrowings, April 2010
                                                            • Figure 37: Type of credit on which money is owed, by amount owed on unsecured borrowings, April 2010
                                                          • Levels of unsecured debt impact financial health
                                                            • Figure 38: Statements describing current financial situation, by amount owed on unsecured borrowings, April 2010
                                                          • Affluent are more likely to have higher amounts of debt
                                                            • Figure 39: Amount owed on unsecured borrowings, by gender, age, socio-economic group, lifestage and household income, April 2010
                                                        • The Consumer – Level of Secured Debt

                                                          • Key points
                                                            • Half of all mortgage borrowers owe more than £100,000
                                                                • Figure 40: Outstanding balance on mortgage and/or homeowner loan, April 2010
                                                              • Mortgage debt does not necessarily contribute to financial hardship
                                                                • Figure 41: Statements describing current financial situation, by outstanding balance on mortgage and/or homeowner loan, April 2010
                                                              • Usage of consumer credit is higher among those with £150K of mortgage debt
                                                                • Figure 42: Type of credit on which money is owed, by outstanding balance on mortgage and/or homeowner loan, April 2010
                                                              • Income determines level of mortgage debt
                                                                • Figure 43: Outstanding balance on mortgage and/or homeowner loan, by gender, age, socio-economic group, lifestage, gross household income and region, April 2010
                                                            • The Consumer – Money Management

                                                              • Key points
                                                                • Two fifths are confident about their money management skills
                                                                    • Figure 44: Statements on financial management, April 2010
                                                                  • Older and more affluent consumers tend to be more prudent
                                                                    • Figure 45: Key demogrpahics for statements about financial management, April 2010
                                                                  • Money management skills influence financial health
                                                                    • Figure 46: Statements on financial management, by statements describing current financial situation, April 2010
                                                                  • High levels of unsecured debt undermine ability to save…
                                                                    • Figure 47: Statements on financial management, by amount owed on unsecured borrowings, April 2010
                                                                  • …but the impact of mortgage debt is less clear-cut
                                                                    • Figure 48: Statements on financial management, by outstanding balance on mortgage and/or homeowner loan, April 2010
                                                                  • Money management attitudes differ by types of credit held
                                                                    • Figure 49: Statements on financial management, by ownership of selected credit produtcs, April 2010
                                                                • The Consumer – Money Management and the Impact of the Recession

                                                                  • Key points
                                                                    • Consumers spilt over the impact of the recession on personal finances
                                                                        • Figure 50: Statements on the impact of the recession on attitudes towards saving, spending and managing money, April 2010
                                                                      • Seeking a financial safety net
                                                                        • Figure 51: Statements on the impact of the recession on attitudes towards saving, spending and managing money, by statements describing current financial situation, April 2010
                                                                      • Recession has a positive impact for the finances of affluent families and couples
                                                                        • Figure 52: Key demographics for statements about the impact of the recession on attitudes towards saving, spending and managing money, April 2010
                                                                      • Mortgage and credit card holders adopt a cautious approach
                                                                        • Figure 53: Statements on the impact of the recession on attitudes towards saving, spending and managing money, by ownership of selected credit products, April 2010
                                                                        • Figure 54: Statements on the impact of the recession on attitudes towards saving, spending and managing money, by repertoire of type of credit on which money is owed, April 2010
                                                                      • Financial discipline is engrained behaviour for some prudent consumers
                                                                        • Figure 55: Statements on the impact of the recession on attitudes towards saving, spending and managing money, by most popular statements on financial management, April 2010
                                                                      • A difficult lesson to learn?
                                                                        • Figure 56: Statements on the impact of the recession on attitudes towards saving, spending and managing money, by next most popular statements on financial management, April 2010
                                                                    • The Consumer – Segmenting the Population

                                                                      • Key points
                                                                        • Only a minority are struggling with debt levels
                                                                          • Figure 57: Financial management and impact of the recession target groups, April 2010
                                                                          • Figure 58: Statements on financial management/impact of the recession on attitudes towards saving, spending and managing money, by target groups, April 2010
                                                                        • Different perspectives on using debt
                                                                          • Figure 59: Statements describing current financial situation, by target groups, April 2010
                                                                        • Reducing reliance on unsecured credit
                                                                          • Figure 60: Type of credit on which money is owed, by target groups, April 2010
                                                                      • Appendix – The Consumer – Financial Situation

                                                                          • Figure 61: Statements describing current financial situation, by demographics, April 2010
                                                                      • Appendix – The Consumer – Credit Ownership

                                                                          • Figure 62: Most popular type of credit on which money is owed, by demographics, April 2010
                                                                          • Figure 63: Next most popular type of credit on which money is owed, by demographics, April 2010
                                                                      • Appendix – The Consumer – Level of Unsecured Debt

                                                                          • Figure 64: Amount owed on unsecured borrowings, by demographics, April 2010
                                                                      • Appendix – The Consumer – Level of Secured Debt

                                                                          • Figure 65: Outstanding balance on mortgage and/or homeowner loan, by demographics, April 2010
                                                                      • Appendix – The Consumer – Money Management

                                                                          • Figure 66: Most popular statements on financial management, by demographics, April 2010
                                                                          • Figure 67: Next most popular statements on financial management, by demographics, April 2010
                                                                      • Appendix – The Consumer – Money Management and the Impact of the Recession

                                                                          • Figure 68: Statements on the impact of the recession on attitudes towards saving, spending and managing money, by demographics, April 2010
                                                                      • Appendix – The Consumer – Segmenting the Population

                                                                          • Figure 69: Target groups, by demographics, April 2010

                                                                      Companies Covered

                                                                      • Asda Group Ltd
                                                                      • Bank of England
                                                                      • Co-operative Group
                                                                      • Consumer Credit Counselling Service
                                                                      • Financial Services Authority (The)
                                                                      • Gfk NOP
                                                                      • John Gilbert Financial Research
                                                                      • Kantar Media
                                                                      • Market & Opinion Research International (MORI)
                                                                      • Money Advice Trust
                                                                      • Office of Fair Trading
                                                                      • Student Loans Company Ltd

                                                                      Consumers' Attitudes Towards Debt - UK - July 2010

                                                                      £1,995.00 (Excl.Tax)