2023
9
UK Personal Loans Market Report 2023
2023-01-24T03:02:55+00:00
OX1154773
2195
159781
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Report
en_GB
"Personal loans lending has gradually recovered from the impact of COVID-19 but remains below pre-pandemic levels. The rising cost of living provides a new challenge for lenders, as a cautious…

UK Personal Loans Market Report 2023

£ 2,195 (Excl.Tax)

Description

The UK Personal Loans 2023 Market Report establishes consumers’ attitudes towards credit products, financial confidence with inflation, and opportunities for lenders to appeal to consumers. This report covers the market size, market forecast, and industry trends for the UK personal loans market.

Personal Loans Market Landscape

The personal loans market is continuing to recover from COVID-19, but rising interest rates amid inflation will now prompt caution among consumers. 47% of UK adults don’t feel comfortable using credit products to borrow money, while many Brits are concerned that the cost of borrowing is rising. This reflects a defensive approach among consumers towards the personal loan market, and borrowing in general.

Consumers’ confidence in their ability to take on new financial commitments fell sharply in 2022, and is expected to remain subdued in 2023. Despite this, as consumers overwhelmingly predict interest rates to keep rising, some may be taking advantage of current interest rates.

Market Size, Share, and Opportunities for Lenders

Retail banks continue to dominate the unsecured loans market. Half of UK adults with a structured personal loan state their loan is with a bank, building society, or major retailer, while less are using specialist lenders. This may demonstrate that borrowers are more ready to trust larger lenders, especially if they are already using them for other services such as a current account. However, specialist lenders can appeal given the popularity of price comparison websites, should they be able to compete on interest rates.

Lenders of any kind can position themselves as a feasible option for financially vulnerable customers through the cost of living crisis. Providers should ensure that tailored support is available to vulnerable customers, and that their repayments are sustainable. Marketing loans as a cost-effective way of borrowing could also show the value advantage of loans to consumers managing multiple credit products.

  • Personal Loan Market size: Estimated 8% growth with £37.7bn value in 2022, remaining below pre-pandemic levels.
  • Personal Loan Market trends: 82% of consumers expect interest rates to rise over the next couple of years.
  • Personal Loan Consumer behaviours: 17% of borrowers consider a loan because they want a new car/vehicle, higher than for other reasons.
  • Personal Loan Market innovation: Open Banking technology could improve affordability and credit checks, making the borrowing process easier.

Personal Loans Industry Forecast

While the unsecured loan market suffered severely in the last recession due to a credit crunch and restrictions on lending, this is not the case this time around. With current inflationary pressures, consumer confidence is the main issue. As inflation eases, consumer confidence will increase. This sums up Mintel’s forecast, which sees the personal loan market value increase consistently beyond 2023, over the next few years.

To discover more about the UK Personal Loans Market, read our UK Consumers and Financial Advice Market Report, or take a look at our extensive Financial Services market research.

Quickly Understand

  • Personal loan market performance, the impact of the cost of living crisis and a five-year market forecast.
  • Unsecured loans market share for major providers.
  • Ownership of unsecured loan products.
  • Future borrowing plans.
  • Information sources used to find new unsecured loans.
  • Consumer attitudes towards personal loans.

Covered in this Report

Products: Personal loans, high-cost short-term credit loans, payday loans, guarantor loans, P2P loans. 

Brands/lenders: Lloyds Banking Group, HSBC, NatWest Group, Barclays, Santander, Nationwide, Virgin, Tesco Bank, Sainsbury’s Bank, Leap Lending, Shawbrook Bank, Zopa Bank, Fluro, Plend, Switchd, JustLend, Punk Money, Loop Money, Amigo Loans, Amplifi Capital, Reevoo Money, Experian, AA, Admiral, Bank of Ireland, Cahoot, The Post Office, RateSetter.

Expert Analysis from a Financial Services Specialist

This report, written by Greta Staselyte, a leading analyst in the Financial Services sector, delivers in-depth commentary and analysis to highlight current trends in the UK Personal Loans market and add expert context to the numbers.

Personal loans lending has gradually recovered from the impact of COVID-19 but remains below pre-pandemic levels. The rising cost of living provides a new challenge for lenders, as a cautious consumer mindset and rising interest rates will dampen demand for new loans throughout 2023.

Greta Staselyte

Greta Staselyte

Financial Services Analyst

Table of Contents

  1. Overview

    • Key issues covered in this Report
    • Products covered in this Report
  2. Executive Summary

    • The five-year outlook for personal loans
      • Figure 1: Category outlook, 2023-27
    • The market
    • Personal loans lending is forecast to reach £43.9 billion by 2027
      • Figure 2: Market forecast for unsecured personal loans, 2017-27
    • Rising interest rates will lessen the appeal of personal loans
    • Companies and brands
    • Lloyds Banking Group remains the biggest personal loan provider
      • Figure 3: Value of outstanding balances for unsecured personal loan/unsecured lending, by selected providers, 2020-21
    • Providers prepare for the new Consumer Duty
    • The consumer
    • More than half of adults owe money on credit or loan product
      • Figure 4: Loan and credit product ownership, 2022
    • Traditional lenders dominate personal loans market
      • Figure 5: Type of structured unsecured loan* money is owed on, 2021-22
    • Nearly half of structured personal loans were taken no more than a year ago
      • Figure 6: Timing of most recent type of structured personal loan* taken out, 2021-22
    • 11% are considering taking out an unsecured personal loan this year
      • Figure 7: Consideration of taking out an unsecured personal loan, 2022
    • Buying a new car is the top reason for taking out a loan
      • Figure 8: Reasons for considering taking out unsecured personal loan, 2022
    • Main bank or building society and PCWs are preferred sources of information
      • Figure 9: Information sources consumers are most likely to use to find new unsecured personal loan, 2022
    • Concerns over rising interest rates will hold back demand for loans
      • Figure 10: Consumer attitudes towards personal loans, 2022
  3. Issues and Insights

    • Decades-high inflation will constrain demand for loans
    • Convenience of credit cards provides major competition for loan providers
    • Open Banking technology presents opportunities to improve customer experience
  4. Market Size and Performance

    • Personal loans lending grew by 8% in 2022…
    • …but remains below pre-pandemic levels
      • Figure 11: Gross lending on unsecured personal loans (not seasonally adjusted), 2018-22
      • Figure 12: Gross lending on unsecured personal loans (not seasonally adjusted), 2016-22
  5. Market Forecast

    • The five-year outlook for personal loans
      • Figure 13: Category outlook, 2023-27
    • Gross personal loans lending forecast to reach £43.9 billion by 2027
      • Figure 14: Market forecast for personal loans, 2017-27
      • Figure 15: Market forecast for personal loans, 2017-27
    • Learnings from the last income squeeze
    • Forecast methodology
  6. Market Drivers

    • Gross unsecured lending grows…
    • …driven by credit card lending
    • Other forms of consumer credit, including loans, grew at a slower rate
      • Figure 16: Gross unsecured lending, by category, 2012-22
      • Figure 17: Gross unsecured lending, 2018-22
    • Rising interest rates will make personal loans less attractive
      • Figure 18: Bank of England base rate and quoted interest rates for personal loans, credit cards and overdrafts, 2019-22
    • Record levels of inflation will likely constrain demand
      • Figure 19: RPI and CPI inflation, 2019-22
    • Household saving activity remains strong
      • Figure 20: Monthly changes to household savings deposits, 2017-22
    • Personal loans market growth will depend on consumer confidence
      • Figure 21: Household financial wellbeing index, 2017-22
  7. Regulatory and Legislative Changes

    • FCA sets final rules and guidance for a new Consumer Duty…
    • …and publishes its Credit Information Market Study initial findings
    • UK commits to reform of the Consumer Credit Act
  8. Market Share

    • Most lenders reported smaller loan books in 2021…
    • …but 2022 has seen a rebound
      • Figure 22: Value of outstanding balances for unsecured personal loans/unsecured lending, by selected providers, 2018-21
  9. Competitive Strategies and Launch Activity

    • Open Banking presents opportunities for both prime and sub-prime lenders
    • P2P lending market sees new entrants…
    • …that aim to make borrowing between friends and family hassle-free
    • Amigo Loans gets FCA approval to return to lending, on a pilot basis
    • Santander launches cheaper home improvement loan for existing mortgage customers
    • Amplifi Capital launches personal loans provider Reevo Money
    • Freedom Finance and Experian announce partnership
    • Interest-free loan scheme expanded to reach up to 20,000 Britons
  10. Advertising and Marketing Activity

    • Adspend falls to the lowest level since 2017-18
      • Figure 23: Total above-the-line, online display and direct mail advertising expenditure on unsecured loans and payday loans, 2017/18-2021/22
    • Sub- and near-prime lenders continue to lead adspend
      • Figure 24: Top eight above-the-line, online display and direct mail advertisers on unsecured loans and payday loans, 2019/20-2021/22
    • A split in advertising strategies
      • Figure 25: Total above-the-line, online display and direct mail advertising expenditure on unsecured loans and payday loans, by media type, 2017/18-2021/22
    • Nielsen Ad Intel coverage
  11. Loan and Credit Product Ownership

    • More than half of consumers have unsecured debts
      • Figure 26: Loan and credit product ownership, 2022
    • Borrowers are most likely to owe money on easy access credit
    • Personal loan ownership remains flat
    • Parents of under-18s are more likely to be loan holders
      • Figure 27: Loan and credit product ownership, by parental status, 2022
  12. Type of Loan Held

    • Traditional lenders dominate personal loans market
      • Figure 28: Type of structured unsecured loan* money is owed on, 2021-22
    • High-cost credit in demand as cost of living rises
      • Figure 29: Type of structured unsecured loan* money is owed on, 2022
  13. Timing and Type of Most Recent Loan

    • Nearly half of structured personal loans were taken out in the last year
      • Figure 30: Timing of most recent structured personal loan* taken out, 2021-22
    • Half of borrowers took out their most recent loan from a traditional provider
      • Figure 31: Most recent type of structured personal loan* taken out, 2021-22
  14. Future Loan Borrowing Plans

    • 11% of adults would consider taking out unsecured personal loan
      • Figure 32: Consideration of taking out an unsecured personal loan, 2022
    • Men more likely to consider taking out a loan than women
    • Prior credit use increases consideration of loans
      • Figure 33: Consideration of taking out an unsecured personal loan, by credit products that people owe money on, 2022
    • Buying a new car is the top reason for taking out a loan
    • 15% are considering a loan to pay for education
      • Figure 34: Reasons for considering taking out an unsecured personal loan, 2022
  15. Sources of Loan Information

    • Consumers are most likely to seek loan information from current account providers…
    • …and price comparison sites
      • Figure 35: Information sources consumers are most likely to use to find new unsecured personal loan, 2022
  16. Attitudes towards Unsecured Loans

    • Concerns over rising interest will hold back borrowing plans…
      • Figure 36: Consumer attitudes towards personal loans, 2022
    • …but most people expect to be able to borrow if they need to
    • Existing borrowers more likely to have positive perceptions of loans
      • Figure 37: Agreement with the statement “I think loans are a good way to borrow a larger sum of money”, by credit products that people owe money on, 2022
    • Almost half of adults are uncomfortable borrowing on credit
  17. Appendix – Data Sources, Abbreviations and Supporting Information

    • Abbreviations
    • Consumer research methodology
  18. Appendix: Forecast Methodology

    • Market forecast and prediction intervals
      • Figure 38: Market forecast for unsecured personal loans, 2022-27
    • Market drivers and assumptions
    • Forecast methodology

About the report

This market report provides in-depth analysis and insight supported by a range of data. At the same time, introductory and top-level content is provided to give you an overview of the issues covered.

Market

Mintel provides a range of market information, frequently through the category level, including market size and forecasting, complete with market drivers that illustrate the forces that shape a category or market.

Consumer

Mintel’s proprietary consumer research provides our analysts with the attitudinal and behavioral data used to provide valuable insight to topical issues.

Brand/Company

Mintel provides overviews of the top brands and manufacturers, and uses consumer research to explore attitudes and reactions to brands, as well as insight into what will resonate with consumers.

Data

Market reports provide appendices of data to support the research and insight produced. Our databooks* are easily manipulated and downloadable to support your research needs and covers factors from consumer attitudes to market forecasts.

*databooks not available with UK B2B Industry reports.

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