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Personal Loans - UK - December 2004
Retail Banking: UK Price: £995 / $1522 / €1119
Report sections
click here to read 'about this report' »
Contents
Introduction and Abbreviations
Executive Summary
Market Factors
Competitor Products
Market Size
Key Players
Product Detail
Distribution and the Internet
Advertising and Promotion
The Consumer
The Future
Forecast
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About this report

The unsecured personal loans market is fiercely competitive and a large number of providers operate in the sector. While consumers continue to prefer to deal with their current account provider when choosing a personal loan, Mintel’s research shows that a significant proportion of consumers choose to seek the least expensive products on the market and a fair percentage believe that there is too much choice.

While a significant increase in base rates could severely affect this market and impact consumer spending in general, in the currently healthy economic environment, the personal loans market remains buoyant.

Using the latest consumer research, market size data and trend analysis, this report provides vital new insight into the current state of the market and its prospects. Mintel examines the market factors which are changing the personal loans sector, while establishing the market share of the leading players and examining personal loan and competition products in detail.

In addition, Mintel's consumer research explores the key influences behind customer decisions about personal loans. Mintel’s findings offer you a unique way of understanding consumer trends and the attitudes of the market’s key target audiences, enabling you to tailor your marketing to real demand, both tactically and strategically. Use Mintel’s research to avoid market pitfalls, discover sector opportunities, identify growth potential and maximise your sales.

If you want more details about this particular report, please contact the Mintel information team on  +1 312-932-0400 in the U.S.,  +44 028-90-241-849 in Northern Ireland,  +353 048-90-241-849 in the Republic of Ireland or  +44 (0)20-7606-6000 in the UK and the rest of the world, or email info@mintel.com.
Key words and phrases within this report

Internet; Lloyds TSB; APR; Barclays; HSBC; Halifax; Abbey; NatWest; RBS; Tesco; Nationwide; Act; PDI; BoE; Safeway; Barclaycard; Asda; Further advances; Unsecured personal loans; MFSP; Consumer Credit Act; IVAs; Alliance & Leicester; Goldfish; Royal Bank of Scotland; Morrisons; Sainsbury's; Bank of England; Bank; Lombard Direct; Scotland; ISA; Kwik Save; Marks & Spencer; Somerfield; Waitrose; Global information and research; Methodology; Consumers have become more cautious; European Parliament; MPC; Finance & Leasing Association; Black Horse; Clydesdale; First Direct; Specialist lenders are the second largest lending group; Virgin Money; Freedom Finance; MBNA; Men; Special Group; Provident; Advertising expenditure; IFA; Market size; Product development; British; Personal; Enterprise Bill; European; European Commission; ICO; OFT; CML; Banco Santander; HBOS Group; Lloyds Bank Group; Privilege Insurance; Woolwich; Norton Finance; Vauxhall Motors; Christmas; Comfortably Off; Yes Car Credit
Contents

Introduction and Abbreviations

Personal loans face stiff competition

Report contents

Methodology

Global information and research

Consumer research

ACORN

Abbreviations

Executive Summary

The value of unsecured personal loans increases

Figure 1: Estimated value of unsecured personal loans, gross lending, 2000-2004

Implications of new regulations and enforcement of the Data Protection Act

Competitor products proffer strong competition

Big financial institutions are most favoured

Customers vote with their feet

Advertising expenditure increases

Reasons for arranging a loan remain fairly practical

Market Factors

New rules could result in falling revenue for some lenders

Consumer Credit Act revamped

MPC expects consumer spending to decelerate

Figure 2: Bank of England base rate, January 1992-October 2004

Consumers have become more cautious

Figure 3: Headline confidence and consumer expectations regarding personal finances – index movements, August 2002-August 2004

The total workforce stood at 30 million in 2003

Figure 4: Size of total workforce, self-employed and proportion unemployed, 1994-2009

European directive follows

Rise in PDI encourages personal loans

Figure 5: PDI, expenditure and savings ratio, at current prices, 1999-2009

A rising base rate has latterly made consumers more cautious about spending

Figure 6: Total debt (outstanding consumer credit and lending secured on dwellings) as a proportion of total PDI, at current prices, 2000-04

Information commissioner recommends credit rating overhaul

Bankruptcy orders – heading for a 10-year-high?

Figure 7: Number of individual bankruptcy orders and IVAs (England and Wales), 1995-Q2 2004

Competitor Products

All-in-one products steal away customers

Premium and packaged bank accounts attempt to tie-in users

The credit card market is thriving

Car finance deals

The value of new car financing has risen

Figure 8: Consumer car finance provided – new business, by type, 1999-2004

New car sales buoyant

Figure 9: Consumer car finance, volume of units – new business, by type, 1999-2003

Extended mortgage borrowing

Service provider loans

The best loan provider?

Market Size

The value of unsecured personal loans accelerated to £56.9 billion in 2004

Figure 10: Unsecured personal loans as a proportion of total consumer credit, gross lending, 1998-2004

Further advances increase in value

Figure 11: Gross mortgage lending by type of loan, including further advances, 1999-2005

Credit card provider activity could increase market size

Key Players

Lloyds TSB leads the market

Figure 12: Personal loans, indicative market share, September 2004

Other providers come to the fore

Abbey favoured by some for home improvement loans

Figure 13: Loan provider by top reason for arranging, September 2004

An estimated 80% of current accounts are held by five providers

Figure 14: Estimated market share of current account providers, 2000 and 2003

Specialist lenders are the second largest lending group

Figure 15: Proportion of consumer credit gross lending accounted for by the main types of lender, 2000-2004

Profiles of the leading providers

Lloyds TSB

NatWest

HSBC

Barclays

Halifax

Abbey

Product Detail

APR rates deceptive

Figure 16: Representative rates and repayments for unsecured Internet and telephone arranged loans, November 2004

New regulation will highlight insurance costs

Non-standard loan products

Product features show the friendly side of marketing strategies

Figure 17: Personal loans – representative list of product features, November 2004

Distribution and the Internet

Providers see growth in Internet distribution

DEs are significantly less likely than average to use the Internet

Figure 18: Internet penetration by gender, socio-economic group, age and working status, July 2004

Providers sometimes prefer to divert customers to website services

Figure 19: Source used to arrange last loan, September 2004

Advertising and Promotion

Advertising expenditure has grown more than 153%

Figure 20: Total advertising expenditure on personal loans, by category, 1999-2003

Direct mail is king

Figure 21: Total advertising expenditure on personal loans, by outlet, 2003

MBNA was the largest spender in 2003

Figure 22: Top personal loan advertisers, by loan category, 2002 and 2003

Manufacturers spend comparatively modest amounts on finance advertising

Figure 23: Car manufacturer finance advertising expenditure, 1999-2003

The Consumer

Some 11% of consumers said that they own a personal loan

Figure 31: Penetration of selected loan products, September 2004

Widespread availability of unsecured loan products has contributed to the sector’s success

Figure 32: Profile of unsecured and secured personal loan holders, by gender, age and socio-economic group, September 2004

People with high incomes are perhaps more likely to choose extending their mortgage

Figure 33: Profile of unsecured and secured personal loan holders, by marital status, lifestage, working status and gross annual household income, September 2004

Tabloid readers are more likely to favour an unsecured loan

Figure 34: Profile of unsecured and secured personal loan holders, by new technology users, newspaper readership, commercial television viewing and supermarket usage, September 2004

The third most cited reason for arranging a loan is debt consolidation

Figure 35: Reasons for arranging a loan, September 2004

Nearly a fifth of consumers have used a loan for car purchase

Figure 36: Top reasons for arranging a loan, by gender, age and socio-economic group, September 2004

Married people are more likely to have a personal loan

Figure 37: Top reasons for arranging a loan, by marital status, lifestage and Special Groups, September 2004

People buying a home are more likely to make use of a personal loan

Figure 38: Top reasons for arranging a loan, by working status, gross annual household income and tenure, September 2004

People living in London are more likely to use a loan to consolidate debts

Figure 39: Top reasons for arranging a loan, by TV region and ACORN category, September 2004

Tesco shoppers more likely to arrange a loan for car purchase

Figure 40: Top reasons for arranging a loan, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, September 2004

The Future

The rise of premium and packaged bank accounts

Credit cards riding on a wave

Will Barclays’ new format show the way?

How have traditional high street banks faired against newer market entrants?

Can providers meet the expectations of a more discerning consumer?

Forecast

Unsecured personal loans

Figure 54: Forecast of unsecured personal loans as a proportion of gross lending, 2004-09

Further advances

Figure 55: Forecast, gross lending, further advances, 2004-09

Factors used in the forecast
Mintel Group ©