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Consumer Attitudes towards Credit Products - UK - July 2018

“Slower annual growth in lending signals a fall in demand, as concern around the potential impact of rising interest rates grows. But, affordability constraints will still make it difficult for many people to clear their debt and significantly reduce their borrowing. Open Banking gives lenders an opportunity to develop tools and services that can help people manage their debt more effectively and find products most suitable to their needs.”

– Jessica Galletley, Senior Financial Services Analyst

This report examines the following issues:

  • Credit management innovations will appeal to the anxious borrower
  • Interest rate concerns see a significant fall in appetite for credit
  • Open Banking will give newer players more of an edge

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this report
      • Executive Summary

          • The market
            • Borrowers continue to benefit from low rate environment
              • Figure 1: UK interest rates, January 2011-April 2018
            • Financial well-being holding up well
              • Figure 2: The financial well-being index, January 2015-May 2018
            • Value of lending continues to rise
              • Figure 3: Value of unsecured lending and annual growth rate, 2008-17
            • Value of mortgage lending rises by 4%
              • Figure 4: Gross mortgage lending, not seasonally adjusted, 2012-17
            • Falling value of write-offs indicates improved industry practice
              • Figure 5: Value of write-offs for individuals, not seasonally adjusted, 2012-17
            • The consumer
              • Two in three have some form of debt
                • Figure 6: Credit product ownership, April 2018
              • One in three owe less than £1,000
                • Figure 7: Value of outstanding unsecured debt, April 2018
              • Over half haven’t reduced their debt in the last two years
                • Figure 8: Debt situation over the last two years, April 2018
              • Borrowers are optimistic about reducing their debt
                • Figure 9: Expected debt situation in the next two years, April 2018
              • Two in three shop around for credit
                • Figure 10: Attitudes towards arranging new credit products, April 2018
              • Borrowers weigh up trust and cost when selecting a provider
                • Figure 11: Important factors when choosing a credit provider, April 2018
              • Significant interest in fintech-based lending innovation
                • Figure 12: Interest in new credit management products and services, April 2018
              • What we think
              • Issues and Insights

                • Credit management innovations will appeal to the anxious borrower
                  • The facts
                    • The implications
                      • Interest rate concerns see a significant fall in appetite for credit
                        • The facts
                          • The implications
                            • Open Banking will give newer players more of an edge
                              • The facts
                                • The implications
                                • The Market – What You Need to Know

                                  • Borrowers continue to benefit from low rate environment
                                    • Financial well-being index holds up well
                                      • Value of lending continues to rise
                                        • Value of mortgage lending rises by 4%
                                          • Falling value of write-offs indicates improved industry practice
                                          • Economic Outlook

                                            • GDP growth continues its downward trend
                                              • Figure 13: Gross domestic product, quarterly change (seasonally adjusted), Q1 2012-Q1 2018
                                            • Inflation exceeds earnings growth throughout 2017
                                              • Figure 14: Inflation, Bank of England base rate and Average Weekly Earnings growth, January 2010-March 2018
                                            • Unemployment falls to four-decade low
                                              • Figure 15: UK unemployment rate, Q1 2007-Q1 2018
                                            • Borrowers continue to benefit from low rates environment
                                              • Figure 16: UK interest rates, January 2011-April 2018
                                          • Consumer Financial Well-being

                                            • Financial well-being index holds strong
                                                • Figure 17: The financial well-being index, January 2015-May 2018
                                                • Figure 18: Current financial situation, May 2018
                                              • Financial situation has worsened over the last year
                                                  • Figure 19: Changes in household finances, January 2015-May 2018
                                                  • Figure 20: Changes in household finances, May 2018
                                                • Financial confidence recovered at the start of 2018
                                                    • Figure 21: The financial confidence index, January 2015-May 2018
                                                    • Figure 22: Consumer sentiment for the coming year, May 2018
                                                • Consumer Credit Lending

                                                  • Value of lending continues to rise
                                                      • Figure 23: Value of unsecured lending and annual growth rate, 2008-17
                                                    • Amount outstanding continues to rise
                                                        • Figure 24: Amounts outstanding of total (excluding the Student Loans Company) unsecured lending to individuals, not seasonally adjusted, January 2008-March 2018
                                                      • Credit cards account for majority of unsecured lending
                                                          • Figure 25: Consumer credit lending (excluding student loans), 2011-17
                                                        • FCA publishes update on high-cost credit
                                                        • Mortgage Market Lending

                                                          • Value of mortgage lending rises by 4%
                                                            • Figure 26: Gross mortgage lending, not seasonally adjusted, 2012-17
                                                          • House purchase approvals stall
                                                            • Figure 27: Annual number of mortgage approvals, by purpose, not seasonally adjusted, 2010-17
                                                        • Write-offs, Repossessions and Insolvencies

                                                          • Falling value of write-offs indicates improved industry practice
                                                            • Figure 28: Value of write-offs for individuals, not seasonally adjusted, 2012-17
                                                          • Mortgage arrears and repossessions remain low
                                                            • Figure 29: Quarterly mortgage arrears (at least 2.5%) and repossessions, Q1 2013-Q1 2018
                                                          • Insolvencies rise for second year
                                                            • Figure 30: Individual insolvencies in England and Wales, by type, not seasonally adjusted, 2013-17
                                                        • The Consumer – What You Need to Know

                                                          • Two in three have some form of debt
                                                            • One in three owe less than £1,000
                                                              • Over half haven’t reduced their debt in the last two years
                                                                • Two in three shop around for credit
                                                                  • Borrowers weigh up trust and cost when selecting a provider
                                                                    • Two in three interested in one or more innovations
                                                                    • Credit Product Ownership

                                                                      • Two in three have some form of debt
                                                                          • Figure 31: Credit product ownership, April 2018
                                                                        • Multiple credit users stand to benefit from account aggregators
                                                                          • Figure 32: Number of credit products currently owing money on, by household income, April 2018
                                                                      • Value of Outstanding Unsecured Debt

                                                                        • One in three owe less than £1,000
                                                                          • Figure 33: Value of outstanding unsecured debt, April 2018
                                                                        • Debt falls with age
                                                                          • Retirement debt is a growing concern
                                                                            • Figure 34: Value of outstanding unsecured debt, by age, April 2018
                                                                        • Debt Situation over the Last Two Years

                                                                          • Over half haven’t reduced their debt in the last two years
                                                                              • Figure 35: Debt situation over the last two years, April 2018
                                                                            • Lower value borrowers more likely to have kept their debt the same
                                                                              • Figure 36: Debt situation over the last two years, by value of unsecured debt, April 2018
                                                                            • Initial credit relationships are important
                                                                              • Figure 37: Debt situation over the last two years, April 2018
                                                                          • Expected Debt Situation in the Next Two Years

                                                                            • Borrowers are optimistic about reducing their debt
                                                                                • Figure 38: Expected debt situation in the next two years, April 2018
                                                                            • Arranging Credit Products

                                                                              • Two in three shop around for credit
                                                                                • Figure 39: Attitudes towards arranging new credit products, April 2018
                                                                              • Credit score awareness will improve application confidence
                                                                                  • Figure 40: Agreement with “Concerns about being rejected put me off applying for credit”, April 2018
                                                                                • Overdraft users disadvantaged by prioritising current account rewards
                                                                                  • Figure 41: Attitudes towards arranging new credit products, by ownership of credit products, April 2018
                                                                              • Attitudes towards Managing Debt

                                                                                • Two in three feel uncomfortable owing money
                                                                                  • Figure 42: Attitudes towards managing debt, April 2018
                                                                                • Young borrowers need clarification on the impact of rising rates
                                                                                    • Figure 43: Attitudes towards managing debt, by age, April 2018
                                                                                  • Half need help saving and repaying debt at the same time
                                                                                    • Case Study: LOQBOX helps people build a credit history through saving
                                                                                    • Important Factors When Choosing a Credit Provider

                                                                                      • Borrowers weigh up trust and cost when selecting a provider
                                                                                          • Figure 44: Important factors when choosing a credit provider, April 2018
                                                                                        • 18-34-year-olds can be enticed with added-value factors
                                                                                          • Figure 45: Important factors when choosing a credit provider, April 2018
                                                                                        • Providers should promote the speed of application
                                                                                        • Interest in Credit Management Innovations

                                                                                          • Two in three interested in one or more innovations
                                                                                            • Services must feel truly personal
                                                                                              • Figure 46: Interest in new credit management products and services, April 2018
                                                                                            • Borrowers owing over £10,000 more are most interested in automation
                                                                                              • Figure 47: Interest in new credit management products and services, by value of unsecured debt, April 2018
                                                                                            • Frequent credit users more interested in credit management services
                                                                                              • Figure 48: Interest in new credit management products and services, by number of credit products held, April 2018
                                                                                            • Case Study: Automated tools make meeting financial goals effortless
                                                                                            • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                • Abbreviations
                                                                                                  • Consumer research methodology

                                                                                                  Consumer Attitudes towards Credit Products - UK - July 2018

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