Table of Contents
Executive Summary
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- Impact of COVID-19 on unsecured loans
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- Figure 1: Short-, medium- and long-term impact of COVID-19 on unsecured loans, January 2021
- The market
- Market size and forecast
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- Figure 2: Market size and forecast for unsecured loans, 2015-25 (prepared in January 2021)
- Unsecured lending crashed in April 2020
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- Figure 3: Gross unsecured lending, by category, January 2016-November 2020
- Payment holidays have been key to regulatory response to COVID-19
- Companies and brands
- NatWest Group had the biggest loan book in 2019, but has been hurt by COVID-19
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- Figure 4: Value of outstanding balances for unsecured personal loans/unsecured lending, by selected providers, 2019
- Adspend fell by 77% in the year to the end of November
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- Figure 5: Total above-the line, online display and direct mail advertising expenditure on unsecured loans, 2015/16-2019/20
- The consumer
- Credit ownership has remained broadly stable over the last year
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- Figure 6: Loan and credit product ownership, November 2020
- Most loans come from traditional lenders
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- Figure 7: Type of loan money is owed on, November 2020
- Loan repayments represent significant expenses for most borrowers
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- Figure 8: Monthly value of repayments to most recent structured personal loan, November 2020
- The impact of COVID-19 on other markets has harmed loan prospects
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- Figure 9: Reasons for taking out most recent structured personal loan, November 2020
- One in seven likely to apply for a loan in the next 12 months
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- Figure 10: Likelihood to apply for a new unsecured personal loan in the next 12 months, November 2020
- Low rates are essential, trust is key, and flexibility can help lenders stand out
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- Figure 11: Important factors when choosing a new loan, November 2020
- COVID-19 has raised concerns, and saving is still preferred over borrowing
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- Figure 12: Attitudes towards unsecured loans, November 2020
Issues and Insights
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- COVID-19 has cut demand for borrowing and confidence in long-term commitments…
- …but offers a chance to enhance perceptions and build trust
- Flexible solutions will appeal, but not if they come with added cost
The Market – Key Takeaways
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- Lending fell by a fifth as COVID-19 hit the unsecured loans market…
- …but low rates and pent-up demand will help the market bounce back
- The pandemic has offered a chance to pay down debts and build up savings
- Payment holidays have been key to regulatory response to COVID-19
Market Size and Forecast
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- Lockdowns have significantly reduced the demand for loans to fuel spending
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- Figure 13: Short-, medium- and long-term impact of COVID-19 on unsecured loans, January 2021
- A significant drop in lending
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- Figure 14: Gross lending on unsecured loans, 2016-20
- Unsecured loans will bounce back as restrictions as lifted
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- Figure 15: Market size and forecast for unsecured loans, 2015-25 (prepared in January 2021)
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- Figure 16: Market forecast for unsecured loans, 2020-25 (prepared in January 2021)
- Market drivers and assumptions
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- Figure 17: Key drivers affecting Mintel’s market forecast, 2015-25 (prepared in January 2021)
- Learnings from the last recession
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- Figure 18: Gross lending on unsecured loans, 2007-12
- Forecast methodology
Market Drivers
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- Unsecured lending crashed in April 2020…
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- Figure 19: Gross unsecured lending, by category, January 2016-November 2020
- …with lending down by a fifth over the year
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- Figure 20: Gross unsecured lending, 2016-20*
- Average indebtedness has risen in recent years
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- Figure 21: Net unsecured lending, January 2017-November 2020
- Loan rates have been stable for years
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- Figure 22: Bank of England base rate and quoted interest rates for personal loans, credit cards and overdrafts, January 2016-December 2020
- Write-offs have been dampened by payment holidays
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- Figure 23: Quarterly write-offs of other unsecured lending to individuals, 2015-20
- Lockdown savings could pose a threat to future borrowing
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- Figure 24: Monthly changes to household savings deposits, January 2016-November 2020
- The economic recovery will take time
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- Figure 25: Annual changes in GDP, and annual average unemployment rate, 2016-25 (forecast)
Regulatory and Legislative Changes
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- Payment holidays have been key to regulatory response to COVID-19
- The CJRS has saved millions of households from serious hardship
- FCA launches review into change and innovation in unsecured credit
- High-cost lenders reminded of their responsibilities following relending review
- New overdraft rules have increased the cost of borrowing
Companies and Brands – Key Takeaways
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- Lenders focus on existing customers amid COVID-19 difficulties
- NatWest Group had the biggest loan book in 2019, but has been hurt by COVID-19
- Adspend fell by 77% in the year to the end of November
Market Share
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- COVID-19 leads to significantly reduced loan books
- NatWest Group had the biggest unsecured loan business in 2019
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- Figure 26: Value of outstanding balances for unsecured personal loan/unsecured lending, by selected providers, 2016-18
Competitive Strategies
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- A focus on supporting existing customers
- Virgin Money launches personal loans to complete product suite
- Zopa expands beyond loans as it receives UK banking licence
- Metro Bank purchases RateSetter
Advertising and Marketing Activity
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- Adspend fell almost to a halt in 2020…
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- Figure 27: Total above-the line, online display and direct mail advertising expenditure on unsecured loans, 2015/16-2019/20
- …and dipped below £100,000 in April
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- Figure 28: Total above-the line, online display and direct mail advertising expenditure on unsecured loans, December 2019-November 2020
- Sub- and near-prime lenders continue to lead adspend
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- Figure 29: Top 10 spenders on advertising for unsecured loans, 2017/18-2019/20
- Nielsen Ad Intel coverage
The Consumer – Key Takeaways
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- COVID-19 has raised concerns, but plans to borrow remain stable
- Young families are the core loan audience
- The impact of COVID-19 on other markets has harmed loan prospects
- Low rates are essential, trust is key, and flexibility can help lenders stand out
Impact of COVID-19 on Consumer Behaviour
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- Financial wellbeing has held up well despite the pandemic
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- Figure 30: The financial wellbeing index, January 2016-January 2021
- Financial confidence dipped in 2020, but most feel good about the year ahead
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- Figure 31: The financial confidence index, January 2015-November 2020
- Non-essential spending has been subdued throughout the pandemic…
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- Figure 32: Impact of COVID-19 on non-essential spending, April 2020-January 2021
- …and a quarter have put off major purchases
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- Figure 33: How consumers have been affected or changed their behaviour as a result of COVID-19, 8-13 January 2021
Loan and Credit Product Ownership
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- Credit ownership has remained broadly stable over the last year
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- Figure 34: Loan and credit product ownership, October 2019 vs November 2020
- Personal loan ownership peaks among 35-54 year olds
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- Figure 35: Structured unsecured loan ownership, by age, November 2020
- Most borrowers limit debt to one credit product
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- Figure 36: Number of loan and credit products that consumers currently owe money on, November 2020
- Figure 37: Loan and credit product ownership, by number of loan and credit products that consumers currently owe money on, November 2020
Type of Loan Held
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- Most loans come from traditional lenders
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- Figure 38: Type of loan money is owed on, November 2020
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- Figure 39: Most recent type of structured personal loan* taken out, November 2020
- High cost credit is a young persons’ market
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- Figure 40: Type of loan money is owed on (NETs), November 2020
Loan Repayments
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- Loan repayments represent significant expenses for most borrowers
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- Figure 41: Monthly value of repayments to most recent structured personal loan, November 2020
Reasons for Borrowing
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- The impact of COVID-19 on other markets has harmed loan prospects
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- Figure 42: Reasons for taking out most recent structured personal loan, November 2020
- Debt consolidation leads reasons for borrowing, but most loans are aspirational
Future Loan Borrowing Plans
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- One in seven likely to apply for a loan in the next 12 months
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- Figure 43: Likelihood to apply for a new unsecured personal loan in the next 12 months, November 2020
- Financially-secure higher earners are more likely to have loan plans
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- Figure 44: Likelihood to apply for a new unsecured personal loan in the next 12 months, by annual household income, November 2020
- Parenthood is a key driver for loans
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- Figure 45: Likelihood to apply for a new unsecured personal loan in the next 12 months, by parental status, November 2020
Important Loan Factors
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- Ultra-low rates appeal to consumers, but make it hard to stand out
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- Figure 46: Important factors when choosing a new loan, November 2020
- Flexibility is a minority consideration
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- Figure 47: Important factors when choosing a new loan, by age, November 2020
- Trust can drive repeat business
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- Figure 48: Important factors when choosing a new loan, by ownership of a structured unsecured loan, November 2020
- Guaranteed acceptance a nice-to-have, not an essential
Attitudes towards Unsecured Loans
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- Saving for purchases is still the preferred option
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- Figure 49: Attitudes towards unsecured loans, November 2020
- COVID-19 concerns are highest among young, ABC1 borrowers
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- Figure 50: Unsecured Loans – CHAID – Tree output, November 2020
- Trust issues hold back potential customers
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
- CHAID Methodology
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- Figure 51: Unsecured Loans – CHAID – Table output, November 2020
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