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Consumer Attitudes towards Debt - UK - July 2019

Covered in this report

This report examines both secured and unsecured lending, although unsecured debt is the focus for the majority of the consumer research. 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.

“Despite a number of positive indicators for households such as rising real wages and historically low levels of unemployment, many remain cautious about committing to big ticket purchases due to a combination of political and economic uncertainty as well as the threat of rising interest rates. This makes for a challenging market for lenders that need to find a way to appeal to borrowers who are increasingly focused on clearing their debts.”

– Thomas Slide, Senior Research Analyst

This report examines the following issues:

  • Addressing concern over the impact of debt on mental health
  • Good household finances but poor economic outlook causes credit growth to stall

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Table of contents

  1. Overview

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

          • The market
            • Growth in unsecured debt stalls
              • Figure 1: Total unsecured household debt, January 2010-April 2019
            • Growth in secured lending also slows
              • Economic growth slows but wages grow
                • Figure 2: Inflation versus average weekly earnings, May 2016-May 2019
              • Uncertainty about the direction and timing of interest rates
                • Insolvencies grow 45% since 2015
                  • Figure 3: Value of write-offs for individuals, 2009-18
                • FCA seeks to take on unfair credit markets
                  • Advertising expenditure on debt products returns to growth
                    • The consumer
                      • Two thirds hold some form of debt product
                        • Figure 4: Types of credit owned, June 2019
                      • 45% of unsecured borrowers owe more than £2,000
                        • Figure 5: Amount of unsecured debt held, by age group, June 2019
                      • 28% have seen the amount of unsecured debt they hold increase
                        • Figure 6: Changes in the amount of unsecured debt, June 2019
                      • Borrowers are optimistic of reducing the amount they owe
                        • Figure 7: Debt intentions, June 2019
                      • Everyday spending is the most common reason to get into debt
                        • Figure 8: Reasons for taking on debt, June 2019
                      • 55% of Older Millennials have borrowed to pay off debts
                        • Figure 9: Debt consolidation, June 2019
                      • More than a quarter are uncomfortable with their debts
                        • Figure 10: Comfort with level of debt, June 2019
                      • Debt and mental health
                        • Figure 11: Attitudes towards debt, June 2019
                      • What we think
                      • Issues and Insights

                        • Addressing concern over the impact of debt on mental health
                          • The facts
                            • The implications
                              • Good household finances but poor economic outlook causes credit growth to stall
                                • The facts
                                  • The implications
                                  • The Market – What You Need to Know

                                    • Growth in unsecured debt stalls
                                      • Growth in secured lending also slows
                                        • Uncertainty over the timing and direction of interest rates
                                          • Economic growth slows but wages grow
                                            • Insolvencies grow 45% since 2015
                                              • FCA takes on unfair credit markets
                                                • Advertising expenditure on debt products returns to growth
                                                • Unsecured Debt

                                                  • Growth in unsecured debt stalled in 2018
                                                    • Figure 12: Total unsecured household debt, January 2010-April 2019
                                                  • But as a proportion of household spending it remains lower
                                                    • Figure 13: Outstanding unsecured household debt as a proportion of total household expenditure, Q1 2019-Q4 2018
                                                  • New lending slowed in 2018
                                                    • Figure 14: Consumer credit excluding student loans, net lending, seasonally adjusted, May 2017-April 2019
                                                • Secured Debt

                                                  • Growth in secured lending slows
                                                    • Figure 15: Gross mortgage lending, not seasonally adjusted, 2009-18
                                                  • Lending for remortgages grows faster than house purchases
                                                    • Figure 16: Value of approvals for lending to individuals, not seasonally adjusted, 2009-18
                                                • Cost of Debt

                                                  • Uncertainty about the timing and direction of interest rate rises
                                                    • Credit cards become more expensive than overdrafts
                                                      • Figure 17: UK interest rates on unsecured credit products, June 2017-May 2019
                                                    • Variable mortgage rates start to rise
                                                      • Figure 18: Owner occupied mortgage rates, based on 75% LTV ratio, June 2017-May 2019
                                                  • Economic Outlook

                                                    • GDP growth slows
                                                      • Figure 19: GDP, quarterly % change (seasonally adjusted), Q1 2013-Q1 2019
                                                    • Rising wages and low inflation provide breathing space for households
                                                      • Figure 20: Inflation versus average weekly earnings, May 2016-May 2019
                                                    • Unemployment continues to fall
                                                      • Figure 21: UK unemployment rate (seasonally adjusted), Q1 2010-Q1 2019
                                                    • Consumers remain upbeat
                                                      • Figure 22: Consumers’ financial wellbeing, three month moving average, January 2017-May 2019
                                                    • Housing transactions slow
                                                      • Figure 23: Annual change in residential housing transactions over £40,000 (non-seasonally adjusted, calendar year), 2009-18
                                                    • New and used car sales fall
                                                      • Figure 24: Volume of new car registrations and used car sales via dealers, 2013-18
                                                  • Write-offs, Repossessions and Insolvencies

                                                    • Write-offs increased in 2018
                                                      • Figure 25: Value of write-offs for individuals, 2009-18
                                                    • Mortgage arrears continue to fall
                                                      • Figure 26: Quarterly mortgage arrears (at least 2.5%) and repossessions, Q1 2016-Q1 2019
                                                    • IVAs contribute to the fastest growth in insolvencies for a decade
                                                      • Figure 27: Number of individual insolvencies, 2009-18
                                                  • Regulatory and Legislative Changes

                                                    • Indebted households to get breathing space
                                                      • Fixing a dysfunctional overdraft market
                                                        • New rules on buy now pay later products
                                                          • Reviewing the credit information market
                                                          • Advertising and Marketing Activity

                                                            • Adspend recovers following a dip in 2017/18
                                                              • Figure 28: Total above-the-line, online display and direct mail advertising expenditure on credit products, 2014/15-2018/19
                                                            • Barclaycard is the biggest spender
                                                              • BGL Group runs first credit campaign
                                                                • Figure 29: Leading spenders on above-the-line, online display and direct mail advertising expenditure on credit products, 2018/19
                                                              • Advertising spend on credit products becomes more mixed
                                                                • Figure 30: Total spending on above-the-line, online display and direct mail advertising expenditure on selected unsecured credit products, 2014/15-2018/19
                                                              • Pulling back from digital
                                                                • Figure 31: Total spending on above-the-line, online display and direct mail advertising expenditure on credit products, by media type, 2014/15-2018/19
                                                              • Campaign highlights
                                                                • Barclaycard uses Simon Cowell to promote its repayment calculator
                                                                  • Figure 32: Simon Cowell and Barclaycard, April 2019
                                                                • Halifax gives ‘That New Home Feeling’
                                                                  • Figure 33: Halifax makes it happen, April 2019
                                                                • NatWest promotes paperless mortgage applications
                                                                  • Figure 34: NatWest – Making banking easier advert, January 2019
                                                                • Comparethemarket.com introduces AutoSergei
                                                                  • Figure 35: AutoSergei advert with credit card EligibilityCheck, April 2019
                                                                • Hell or Habito
                                                                  • Figure 36: ‘Hell or Habito’ advertising campaign, March 2019
                                                                • Nielsen Ad Intel coverage
                                                                • The Consumer – What You Need to Know

                                                                  • Two thirds hold some form of debt product
                                                                    • 45% of unsecured borrowers owe more than £2,000
                                                                      • Fewer people have paid down debts
                                                                        • Borrowers are optimistic of reducing the amount they owe
                                                                          • Everyday spending is the most common reason to get into debt
                                                                            • 55% of Older Millennials have borrowed to pay off debts
                                                                              • More than a quarter are uncomfortable with their debts
                                                                                • Debt and mental health
                                                                                • Types of Credit Held

                                                                                  • Two thirds hold some form of debt product
                                                                                    • Universal view of credit cards
                                                                                        • Figure 37: Types of credit owned, June 2019
                                                                                      • Younger people taking on payday loans and instant credit
                                                                                        • Figure 38: Types of credit owned, by average age and socio-economic group, June 2019
                                                                                      • Over three quarters of 25-34 year olds have unsecured debt
                                                                                        • Debt-free over 65
                                                                                          • Figure 39: Types of credit owned (net), by age group, June 2019
                                                                                        • Multiple credit products offer opportunities to simplify the experience
                                                                                          • Figure 40: Repertoire analysis of credit products held, by age group, June 2019
                                                                                      • Value of Unsecured Debt

                                                                                        • 45% owe more than £2,000
                                                                                          • Figure 41: Amount of unsecured credit held, by age group, June 2019
                                                                                        • Those with payday loans and instant credit among the most indebted
                                                                                          • Figure 42: Amount of unsecured credit held, by credit products owned, June 2019
                                                                                        • Londoners are most likely to owe more than £10,000
                                                                                          • Figure 43: Over £10,000 in unsecured debt, by region, June 2019
                                                                                      • Changes in Debt Situation

                                                                                        • Fewer people have paid down debts
                                                                                          • Figure 44: Changes in the amount of unsecured debt, June 2018/ June 2019
                                                                                        • Under-45s taking on debt while over-45s are paying it off
                                                                                          • Figure 45: Changes in the amount of unsecured debt, by age group, June 2019
                                                                                      • Debt Intentions

                                                                                        • Three quarters expect to pay down debts in the next two years
                                                                                          • Figure 46: Debt intentions, June 2018/June 2019
                                                                                        • The psychological importance of momentum
                                                                                          • Figure 47: Debt intentions, by changes in debt situation, June 2019
                                                                                      • Reasons for Taking on Debt

                                                                                        • Everyday spending is the main cause of unsecured debt
                                                                                          • Figure 48: Reasons for taking on debt, June 2019
                                                                                        • Young people get into debt setting up in life
                                                                                          • Figure 49: Reasons for taking on debt, by age and SEG, June 2019
                                                                                        • Those who plug the gap in living costs have the lowest level of debt
                                                                                          • Figure 50: Reasons for taking on debt, by value of unsecured debt, June 2019
                                                                                      • Debt Consolidation

                                                                                        • Half of Millennials borrow to pay off debts
                                                                                          • Figure 51: Debt consolidation, by age group, June 2019
                                                                                        • Unplanned borrowing is least likely to be consolidated
                                                                                          • Figure 52: Debt consolidation, by reasons for getting into debt, June 2019
                                                                                      • Comfort with Level of Debt

                                                                                        • 28% are uncomfortable with their current level of debt
                                                                                          • Figure 53: Comfort with level of debt, by age and gender, June 2019
                                                                                        • New overdraft rules to help those who are least comfortable
                                                                                            • Figure 54: Uncomfortable with their current level of debt, by type of loan product held, June 2019
                                                                                          • Those who borrow for specific things are most comfortable
                                                                                              • Figure 55: Reasons for taking on debt, by comfort with current level of debt, June 2019
                                                                                          • Attitudes towards Debt

                                                                                            • Debt and mental health
                                                                                                • Figure 56: Attitudes towards financial wellbeing, June 2019
                                                                                              • Making credit work
                                                                                                  • Figure 57: Attitudes towards managing debt, June 2019
                                                                                                • Over half think a rise in interest rates would be bad news
                                                                                                  • Figure 58: Attitudes towards getting into debt, June 2019
                                                                                                • The generational divide
                                                                                                  • Figure 59: Attitudes towards debt, by age group, June 2019
                                                                                              • Target Group Analysis

                                                                                                  • Figure 60: Target group analysis, June 2019
                                                                                                • Savvy Borrowers
                                                                                                  • Wary Debtors
                                                                                                    • Quietly Concerned
                                                                                                    • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                        • Abbreviations
                                                                                                          • Consumer research methodology

                                                                                                          Consumer Attitudes towards Debt - UK - July 2019

                                                                                                          £2,195.00 (Excl.Tax)