2022
9
UK Personal Loans Market Report 2022
2022-02-25T03:07:55+00:00
REPD41E5714_8D3A_4CC1_8519_89CAC7481B06
2195
148278
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Report
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“The pandemic and successive lockdowns drastically impacted the personal loans sector, limiting spending opportunities and reducing the need and willingness to make big-ticket purchases. Consumers will remain cautious about their…
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  8. UK Personal Loans Market Report 2022

UK Personal Loans Market Report 2022

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The UK Personal Loans report identifies consumer attitudes towards market performance, ownership of unsecured loan products, and future borrowing plans in the UK. This market report covers the market size, market forecast, market segmentation and industry trends for the Personal Loans market in the UK.

Current Market Landscape

Inflation pressures will have a disproportionate effect on lower income groups who will find it much harder to cope with rising prices, given that they have relatively little slack in their budgets. While some people in these groups might be wary of taking out a personal loan, others will be forced to consider this option to make ends meet. Those who are struggling have limited credit options and many will turn to high-cost credit solutions with lenders who specialise in the sub-prime market.

  • 33% of adults think that loan providers can’t be trusted to be transparent about fees, while 77% think that early repayment charges should be made clearer.
  • 15% of those who are considering taking out a loan in the next 12 months would take out one to pay for the things they need.
  • 20% of those considering taking out a loan in the next 12 months cite home improvements as the main reason for a loan.

If consumers can’t be confident about fees and costs, they are less likely to consider the product, and a lack of flexibility over early repayment will push more people towards revolving credit products. Addressing this issue is important for lenders if they are to build more engagement with the product and shift consumers away from other familiar forms of credit.

Future Market Trends in Personal Loans 

The pandemic and successive lockdowns drastically impacted this sector, limiting spending opportunities and reducing the need and willingness to make big-ticket purchases. Economic uncertainty led to faltering consumer confidence, which also drove down demand for personal loans. Economic growth and higher consumer spending should help to drive growth in the loans market. However, loan providers will also need to ensure their products are well placed to compete with more flexible borrowing solutions as consumers will continue to take a cautious approach to their finances.

This is likely to sustain demand for borrowing as people will continue to reassess and try to improve their homes. Marketing loans alongside DIY and other home improvement service could prompt more people to consider their plans and possibly upgrade to bigger projects with the help of additional funds.

Read on to discover more details or take a look at all of our UK Financial Services market research.

Quickly understand

  • Market performance, including a five-year market forecast.
  • An analysis of competitive strategies and launch activity.
  • Ownership of unsecured loan products.
  • Method of arranging personal loans.
  • Behaviours towards personal loans.
  • Future borrowing plans.
  • Attitudes towards personal loans.

Covered in this report

Brands: Lloyds Banking Group, NatWest Group, HSBC, Barclays, Santander, Nationwide, Virgin, Tesco Bank, Sainsbury’s Bank, Metro Bank, Vanquis Bank, Zopa, Tandem Bank, Revolut, Experian, Novuna Personal Finance (Hitachi Personal Finance).

Expert analysis from a specialist in the field

This report, written by Stefania Apostol, a leading analyst in the Financial sector, delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

The pandemic and successive lockdowns drastically impacted the personal loans sector, limiting spending opportunities and reducing the need and willingness to make big-ticket purchases. Consumers will remain cautious about their spending and borrowing as the cost of living rises. However, some people will have to consider personal loans to make ends meet. Demand for personal loans is also likely to be sustained by home improvements, as people will continue to reassess and try to improve their homes.

Stefania Apostol - Financial Services AnalystStefania Apostol
Financial Service Analyst

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  1. Overview

    • Key issues covered in this Report
    • COVID-19: market context
    • Economic and other assumptions
    • Products covered in this Report
  2. Executive Summary

    • The five-year outlook for personal loans
      • Figure 1: Category outlook, 2022-26
    • The market
    • Personal loans lending has started to recover
      • Figure 2: Gross lending on unsecured personal loans (not seasonally adjusted), 2017-21
    • Personal loans expected to return to growth
      • Figure 3: Market forecast for unsecured personal loans, 2016-26
    • Personal loans interest rates remain competitive
      • Figure 4: Bank of England base rate and quoted interest rates for personal loans, credit cards and overdrafts, 2017-21
    • Saving activity remains higher than pre-pandemic
    • Financial confidence fluctuates…
      • Figure 5: Financial Confidence Index, 2019-21
    • …as rising inflation raises concerns
    • Companies and brands
    • Most providers saw a decline in loan books
      • Figure 6: Value of outstanding balances for unsecured personal loan/unsecured lending, by selected providers, 2020
    • Sub-prime lenders continue to face pressure…
    • …but a number of brands are ready to fill the gap
    • The consumer
    • Over half of adults owe money on a credit or loan product
      • Figure 7: Loan and credit product ownership, 2020-21
    • 56% of loan-holders have a loan from traditional lenders
      • Figure 8: Type of structured unsecured loan* money is owed on, 2020-21
    • A third of borrowers took out their most recent loan within the last year
      • Figure 9: Timing of most recent type of structured personal loan* taken out, 2021
    • Online is the dominant channel for application
      • Figure 10: Method of applying for the most recent structured personal loan* taken out, 2021
    • The vast majority prefer to use well-known banks or loan providers
    • Over half of borrowers compare interest rates
      • Figure 11: Behaviours towards structured personal loans*, 2021
    • 12% of adults would consider taking out a personal loan
      • Figure 12: Consideration of taking out an unsecured personal loan, 2021
    • Paying for home improvements is the top reason for taking out a loan
    • 15% would take out a loan to make ends meet
      • Figure 13: Reasons for considering taking out an unsecured personal loan, 2021
    • Consumers want transparency about early repayment charges…
    • …and fees
      • Figure 14: Attitudes towards personal loans, 2021
  3. Issues and Insights

    • Traditional loans have been squeezed during the pandemic
    • Home improvements remain a key driver for taking out a loan
    • Inflation pressures highlight a gap in the market for low-value loans
  4. Market Size and Performance

    • Personal loans lending has started to recover
      • : Figure 15: Gross lending on unsecured personal loans (not seasonally adjusted), 2017-21
      • Figure 16: Gross lending on unsecured personal loans (not seasonally adjusted), 2016-21
  5. Market Forecast

    • The five-year outlook for personal loans
      • Figure 17: Category outlook, 2022-26
    • Personal loans expected to return to growth
      • Figure 18: Market forecast for unsecured personal loans, 2016-26
    • Market drivers and assumptions
      • Figure 19: Key drivers affecting Mintel’s market forecast, 2015-26
    • Forecast methodology
  6. Market Drivers

    • Gross unsecured lending bounces back
    • Credit card lending grew at a faster rate…
    • …than other forms of consumer credit, including loans
      • Figure 20: Gross unsecured lending, by category, 2017-21
      • Figure 21: Gross unsecured lending, 2017-21
    • Consumers focus on repaying debt
      • Figure 22: Net unsecured lending, 2017-21
    • Personal loans interest rates remain competitive
      • Figure 23: Bank of England base rate and quoted interest rates for personal loans, credit cards and overdrafts, 2017-21
    • Other unsecured lending write-offs remain lower than pre-pandemic
      • Figure 24: Quarterly write-offs of other unsecured lending to individuals, 2017-21
    • Saving activity remains higher than pre-pandemic
      • Figure 25: Monthly changes to household savings deposits, 2017-21
    • Financial confidence fluctuates…
      • Figure 26: Financial Confidence Index, 2019-21
    • …as rising inflation raises concerns
      • Figure 27: Consumer concerns about household finances, 2021
  7. Regulatory and Legislative Changes

    • FCA is set to introduce a new Consumer Duty
    • FCA published its review into the unsecured credit market
    • Payment deferral scheme ends
  8. Market Share

    • 2020 saw a decline in loan books across the market
    • …with mixed results for half-year 2021
      • Figure 28: Value of outstanding balances for unsecured personal loan/unsecured lending, by selected providers, 2017-20
  9. Competitive Strategies and Launch Activity

    • Sub-prime lenders continue to face pressure…
    • …but a number of brands are ready to fill the gap
    • Open banking presents new opportunities for sub-prime lending
    • BNPL products might put pressure on lower-value personal loans
    • Metro Bank launches a new personal loan
    • Tandem Bank purchases Oplo
    • Revolut launches On-Demand Pay
    • Vanquis Bank introduces new personal loans
    • Experian launches a loan comparison service for non-profit community lenders
    • Zopa closes its peer-to-peer (P2P) business
    • Hitachi Personal Finance becomes Novuna Personal Finance
  10. Advertising and Marketing Activity

    • Adspend remains suppressed
      • Figure 29: Total above-the-line, online display and direct mail advertising expenditure on unsecured loans and payday loans, 2016/17-2020/21
    • Sub- and near-prime lenders continue to dominate adspend…
    • …but prime lenders are also increasing expenditure
      • Figure 30: Top 10 above-the-line, online display and direct mail advertisers on unsecured loans and payday loans, 2018/19-2020/21
    • TV continues to dominate advertising expenditure…
    • …while direct mail gains traction among high-street banks
      • Figure 31: Total above-the-line, online display and direct mail advertising expenditure on unsecured loans and payday loans, by media type, 2016/17-2020/21
    • Nielsen Ad Intel coverage
  11. Loan and Credit Product Ownership

    • Over half of adults owe money on a credit or loan product
    • Credit cards are the dominant products
      • Figure 32: Loan and credit product ownership, 2020-21
    • Personal loan ownership is higher among Millennials
      • Figure 33: Loan and credit product ownership, by generation, 2021
  12. Type of Loan Held

    • Over half of loan-holders have a loan from traditional lenders
    • Specialist lenders increase their reach
      • Figure 34: Type of structured unsecured loan* money is owed on, 2021
    • Demand for high-cost credit set to increase as cost of living increases
      • Figure 35: Type of structured unsecured loan* money is owed on – NET, 2021
  13. Timing and Value of Most Recent Loan

    • A third of borrowers took out their most recent loan within the last year
      • Figure 36: Timing of most recent type of structured personal loan* taken out, 2021
    • More than half of borrowers took out more than £5,000
      • Figure 37: Value of the most recent type of structured personal loan* taken out, 2021
  14. Method of Arranging Loans

    • Online is the dominant channel for application
    • Open banking will deliver a more personalised experience
      • Figure 38: Method of applying for the most recent structured personal loan* taken out, 2021
    • Most personal loan-holders arranged their loan directly with the lender…
    • …while a significant minority used PCWs and credit brokers
      • Figure 39: Method of arranging the most recent structured personal loan* taken out, 2021
  15. Behaviours towards Personal Loans

    • The vast majority prefer to use well-known banks or loan providers
    • Over half of borrowers compare interest rates
    • COVID-19 has had an uneven impact on borrowers
      • Figure 40: Behaviours towards structured personal loans*, 2021
  16. Future Loan Borrowing Plans

    • 12% of adults would consider taking out a personal loan
      • Figure 41: Consideration of taking out an unsecured personal loan, 2021
    • Consideration is higher among existing loan borrowers
      • Figure 42: Consideration of taking out an unsecured personal loan, by loan and credit product ownership, 2021
    • Paying for home improvements is the top reason for taking out a loan
    • 15% would take out a loan to make ends meet
      • Figure 43: Reasons for considering taking out an unsecured personal loan, 2021
  17. Attitudes towards Personal Loans

    • Consumers want transparency about early repayment charges…
    • …and fees
      • Figure 44: Attitudes towards personal loans, 2021
    • Younger adults are concerned about damaging their credit score
      • Figure 45: Attitudes towards personal loans, by age, 2021
  18. Appendix – Data Sources, Abbreviations and Supporting Information

    • Abbreviations
    • Consumer research methodology
  19. Appendix – Forecast Methodology

    • Market forecast and prediction intervals
      • Figure 46: Market forecast for unsecured personal loans, 2021-26
    • Market drivers and assumptions
    • Forecast methodology

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