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UK Consumer Attitudes Towards Debt market report

Everything you need to make the right decisions

Providing the most comprehensive and up-to-date information and analysis of the Consumer Attitudes Towards Debt market, and the behaviours, preferences and habits of the consumer.

Mintel has the answers you’re looking for

What are the key challenges facing the industry and how fast are its rates of growth? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

This report discusses the following key topics:

  • Family and friends growing as a source of credit
  • Opportunity for a resurgence of PPI?
  • Postponed life-events will increase demand for credit later in life

This Report presents Mintel's exclusive consumer research into consumer attitudes towards debt. It examines how views are changing and the types of credit people are turning to. The Report looks at how much people owe and where, as well as how consumers are managing their debt and expected sources of credit in the future. It explores the macroeconomic drivers behind consumer behaviour, and provides insight into consumer relationships with credit in the future.

This Report examines both secured and unsecured lending. 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.

Expert analysis from a specialist in the field

Written by Richard Shepherd, a leading analyst in the Finance sector, his extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

Cheap loans and attractive credit card deals have fuelled a boom in unsecured lending since the recession. However, the economic fallout from Brexit means consumers are already feeling the squeeze of a combination of rising prices and slow wage growth. As a result, more consumers are likely to turn to revolving credit for day-to-day spending. However, consumers will also take a more cautious approach to their finances, becoming more reluctant to commit to structured lending products, making it more difficult to sell personal loans. Richard Shepherd
Senior Financial Services Analyst

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Table of contents

  1. Overview

    • What you need to know
      • Definitions
      • Executive Summary

          • The market
            • Low rates mean credit is still attractive despite gathering clouds
              • Figure 1: UK interest rates, January 2012 – May 2017
              • Figure 2: Annual inflation rate, RPI and CPI, Q3 2007 – Q1 2017
            • Consumer confidence is starting to fall
              • Figure 3: The financial confidence index, January 2016 – May 2017
            • Gross consumer credit lending reached £260.2 billion in 2016
              • Figure 4: Annual gross and net credit card lending, not seasonally adjusted, 2010-2016
              • Figure 5: Annual gross and net other consumer credit lending, not seasonally adjusted, 2010-2016
            • The consumer
              • 61% of consumers have outstanding unsecured debts
                • Figure 6: Credit product ownership, May 2017
              • Micro-debts have increased in the last year
                • Figure 7: Amount owed on unsecured credit products, May 17
              • Paying off debt is the priority for most
                • Figure 8: Plans for credit use/repayment in the next two years, May 2017
              • Consumers are largely undecided on the impact of Brexit
                • Figure 9: Anticipated effects of Brexit on credit markets, May 2017
              • Cost is key when choosing a credit product but brand is still a factor
                • Figure 10: Attitudes towards debt, May 2017
              • Credit cards are the favoured form of credit
                • Figure 11: Preferred form of credit for different purchases, May 2017
              • What we think
              • Issues and Insights

                • Surge in micro-debts points to the first signs of difficulty
                  • The facts
                    • The implications
                      • On balance, Brexit is expected to cause problems for borrowers
                        • The facts
                          • The implications
                            • Will Open Banking make it easier for challengers to compete?
                              • The facts
                                • The implications
                                • The Market – What You Need to Know

                                  • Low rates mean credit is still attractive despite gathering clouds
                                    • Consumer confidence is starting to fall
                                      • Gross consumer credit lending reached £260.2 billion in 2016
                                        • Mortgage lending is expected to slow
                                          • Write-offs and bankruptcies fell again last year
                                          • Economic Outlook

                                            • GDP growth fell to 0.2% in Q1 2017
                                              • Figure 12: Gross domestic product, quarterly change (seasonally adjusted), Q1 2012 – Q1 2017
                                            • Rising prices put the squeeze on consumers…
                                              • Figure 13: Annual inflation rate, RPI and CPI, Q3 2007 – Q1 2017
                                            • …as wage growth fell last year
                                              • Figure 14: Annual wage growth, UK, 2007-2016
                                            • Interest rates remain attractive for borrowers
                                              • Figure 15: UK interest rates, January 2012 – May 2017
                                            • Unemployment fell throughout 2016
                                              • Figure 16: UK unemployment rate, Q3 2007 – Q1 2017
                                            • A note on Brexit
                                            • Consumer Financial Well-being

                                              • Inflation has hit financial well-being
                                                  • Figure 17: The financial well-being index, January 2016 – May 2017
                                                  • Figure 18: Current financial situation, May 2017
                                                • Most consumers’ finances are about the same as last year…
                                                    • Figure 19: Changes in household finances, January 2016 – May 2017
                                                    • Figure 20: Changes in household finances, May 2017
                                                  • … but confidence for next year is dropping
                                                      • Figure 21: The financial confidence index, January 2016 – May 2017
                                                      • Figure 22: Consumer sentiment for the coming year, May 2017
                                                  • Consumer Credit Lending

                                                    • Gross lending continues to grow
                                                        • Figure 23: Monthly gross and net unsecured lending to individuals, excluding the Student Loans Company, not seasonally adjusted, January 2010 – April 2017
                                                      • Credit card balances increased by £5.5 billion in 2016
                                                        • Figure 24: Annual gross and net credit card lending, not seasonally adjusted, 2010-2016
                                                      • Growth in loan lending is expected to slow
                                                          • Figure 25: Annual gross and net other consumer credit lending, not seasonally adjusted, 2010-2016
                                                      • Mortgage Market Lending

                                                        • Mortgage lending was boosted by a surge in BTL sales in 2016
                                                          • Figure 26: Gross and net mortgage lending, not seasonally adjusted, 2012-16
                                                        • Mortgage approvals fell after the EU referendum
                                                          • Figure 27: Quarterly number of mortgage approvals, by purpose, not seasonally adjusted, Q1 2012 – Q1 2017
                                                      • Write-offs, Repossessions and Insolvencies

                                                        • Write-offs fall despite credit card rise
                                                          • Figure 28: Value of write-offs to loans to individuals, not seasonally adjusted, 2012-16
                                                        • Mortgage arrears and repossessions stable through 2016
                                                          • Figure 29: Quarterly repossessions and mortgage arrears (at least 2.5%), Q1 2012 – Q1 2017
                                                        • Rise in IVAs fuels increase in all insolvencies
                                                          • Figure 30: Individual insolvencies in England and Wales, by type, not seasonally adjusted, 2012-16
                                                        • Online bankruptcies help to remove stigma
                                                          • Figure 31: Individual bankruptcies in England and Wales, by petition type, not seasonally adjusted, 2012-16
                                                      • The Consumer – What You Need to Know

                                                        • 61% of consumers have outstanding unsecured debts
                                                          • Micro-debts have increased in the last year
                                                            • Paying off debt is the priority for most
                                                              • Consumers are largely undecided on the impact of Brexit
                                                                • Cost is key when choosing a credit product but brand is still a factor
                                                                  • Credit cards are the favoured form of credit
                                                                  • Credit Product Ownership

                                                                    • 61% of consumers have outstanding unsecured debts
                                                                      • Figure 32: Credit product ownership, May 2016 vs May 2017
                                                                    • 25-44-year-olds are the most likely to have unsecured debt
                                                                      • Figure 33: Credit product ownership, by age, May 2017
                                                                    • Hard-up consumers most likely to use an overdraft or borrow from peers
                                                                      • Figure 34: Ownership of selected unsecured credit products, by current financial situation, May 2017
                                                                    • Half of those with unsecured debt only have one type of product
                                                                      • Figure 35: Unsecured credit product ownership, repertoire analysis, May 2017
                                                                      • Figure 36: Unsecured credit product ownership, by number of unsecured credit products owned, May 2017
                                                                  • Level of Outstanding Unsecured Debt

                                                                    • Micro-debts have increased in the last year
                                                                      • Figure 37: Amount owed on unsecured credit products, 2012-17
                                                                    • More well-off consumers more likely to have larger unsecured debts
                                                                      • Figure 38: Amount owed on unsecured credit products, by gross annual household income, May 2017
                                                                  • Expected Debt Situation in the Next Two Years

                                                                    • Paying off debt is the priority for most
                                                                        • Figure 39: Plans for credit use/repayment in the next two years, May 2017
                                                                      • Card users are less sure about their plans for credit use
                                                                        • Figure 40: Plans for credit use/repayment in the next two years, by amount owed on unsecured credit products, May 2017
                                                                        • Figure 41: Plans for credit use/repayment in the next two years, by unsecured credit product ownership, May 2017
                                                                    • Anticipated Effects of Brexit

                                                                      • Consumers are largely undecided on the impact of Brexit
                                                                        • Figure 42: Anticipated effects of Brexit on credit markets, May 2017
                                                                      • Three in ten say Brexit will make it harder to repay debt
                                                                        • Interest rates considered more likely to go up than down…
                                                                          • … but credit should be freely available still
                                                                          • Attitudes towards Debt

                                                                            • Cost is key when choosing a credit product...
                                                                              • … but brand is still a factor
                                                                                • Figure 43: Attitudes towards debt, May 2017
                                                                              • Half would be interested in borrowing guidance from their bank
                                                                                • Most consumers’ borrowing plans are unaffected by Brexit...
                                                                                  • Figure 44: Response to the statement “Uncertainty associated with Brexit is putting me off borrowing money”, by age, May 2017
                                                                                • … but current debt users are more wary
                                                                                  • Figure 45: Response to the statement “Uncertainty associated with Brexit is putting me off borrowing money”, by unsecured credit product ownership, May 2017
                                                                                • A third of Millennials would prefer to rent than buy with credit
                                                                                  • Figure 46: Response to the statement “I would prefer to rent/hire expensive items (eg car, furniture) rather than taking out credit to pay for them”, by generation, May 2017
                                                                              • Future Use of Credit Products

                                                                                • Credit cards are the favoured form of credit for almost all needs…
                                                                                  • Figure 47: Preferred form of credit for different purchases, May 2017
                                                                                • … but consumers are generally reticent to use credit
                                                                                  • Under-44s are more open to using credit for non-essentials
                                                                                    • Figure 48: Future use of credit products – “Any type of credit”, by age, May 2017
                                                                                • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                    • Abbreviations
                                                                                      • Consumer research methodology