Table of Contents
Issues in the Market
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- Mintel asks…
- Market definitions
- Secured lending
- Unsecured lending
- Abbreviations
Insights and Opportunities
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- A large part of the population will be hit by the credit crunch
- 3 million have debt worries
- Scope to grow the debt consolidation loan market
- Debt levels reducing?
- Debt repayment to be given priority
- Many may rethink their moving plans
Market in Brief
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- The mortgage market is braced for a sharp fall…
- …while the consumer credit market grinds to halt
- Even more difficult times ahead
- As the mortgage market contracts, competitive pressures ease
- So what are mortgage holders planning to do over the coming year?
- Mortgage and credit card debts are the most common
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- Figure 1: Proportion of UK adults with various types of debt, 2007 and 2008
- A quarter of mortgage holders owe more than £100,000
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- Figure 2: Amount of outstanding secured debt, 2007 and 2008
- Unsecured borrowers generally owe less than they did a year ago
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- Figure 3: Amount of outstanding unsecured debt, 2007 and 2008
- People feel worse off now than two years ago…
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- Figure 4: Current financial situation, 2006 and 2008
- …but there has been a slight fall in those with debt worries
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- Figure 5: Agreement with statements about saving, borrowing and managing money, 2006 and 2008
Fast Forward Trends
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- Trend 1: Bling Bling
- Image-conscious society
- Bling culture plunging Brits into debt
- Pressure to consume?
- More thorough checks and better education needed
- Trend 2: Finance in flux
- iPod generation
- Retired and still paying off the mortgage
- Debt time bomb
Household Debt in Context
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- Key points
- The debt mountain
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- Figure 6: Amount of household debt outstanding, secured and unsecured, January 1993-April 2008
- Credit cards used to pay the mortgage
- More feeling the pinch
- Net lending set to fall sharply in 2008
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- Figure 7: Net lending as a proportion of personal disposable income (non-seasonally adjusted), at current prices, 2000-08
- Debt-to-income ratio continues to move upwards
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- Figure 8: The value of personal sector debt as a proportion of total PDI, at current prices, 1998-2008
- Other indicators also paint a gloomy picture
- Putting debt into context
- Factors fuelling over-indebtedness
- Borrowings versus savings
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- Figure 9: Population segmentation, according to possession of unsecured debts and savings, by gender, age, socio-economic group and lifestage, April 2008
- Being in debt is an affliction of youth
- FTBs are becoming a rare breed
Changing Market Environment
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- Key points
- Economic trials ahead
- Reduced spending to slow economic activity
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- Figure 10: GDP annual growth and proportion of workforce unemployed – UK, 1999-2008
- Inflation worries
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- Figure 11: Average annual changes in the bank base rate, CPI and RPI – UK, 2000-08
- Stagflation
- Consumer confidence at lowest level since the early 1990s
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- Figure 12: Changes in headline consumer confidence – monthly and 12-month rolling average, May 2001-May 2008
- Spending curtailed as people take a more cautious approach to their finances
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- Figure 13: Intentions to save and spend in the next 12 months, 2001-08
The Crunch Effect
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- Key points
- The origins of the credit crisis
- Liquidity dries up
- Bank run on Northern Rock
- Sharp reduction in supply of mortgages
- Lenders close the doors on first-time buyers
- Thousands of credit card applications turned down every day
- Bank of England launches scheme to improve liquidity
- Banks face big losses…
- …and some turn to their shareholders to raise cash
- Mortgage and loan providers cut back on advertising
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- Figure 14: Quarterly advertising expenditure on credit/store cards, personal loans and mortgage products, Q2 2006-Q1 2008
The Mortgage Lending Market
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- Key points
- All change
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- Figure 15: Gross secured lending, by loan type - illustration, 2003-13
- Gross mortgage advances to fall by a fifth in 2008
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- Figure 16: Gross secured lending, by type of loan, 2000-08
- Slow recovery forecast
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- Figure 17: Forecast of gross secured lending, 2008-13
- Factors incorporated
The Consumer Credit Market
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- Key points
- The party’s over
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- Figure 18: Gross consumer credit lending - illustration, 2003-13
- Borrowers show greater preference for credit cards
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- Figure 19: Gross consumer credit lending, 2000-08
- A stagnant market forecast for the short term
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- Figure 20: Forecast of gross consumer credit lending, 2008-13
- Factors incorporated
The Consumer – Ownership of Lending Products
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- Key points
- About Mintel’s consumer survey
- A nation of borrowers
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- Figure 21: Types of outstanding debt held, by gender, April 2008
- 15 million people have a mortgage…
- …while 22 million have built up unsecured debts
- Gender bias
- Credit cards are a popular option for those seeking credit
- Debt consolidation remains a niche area
- Store cards lose their shine
- Slight increase in the proportion with debts over the past year
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- Figure 22: Types of outstanding debt held, 2007 and 2008
- Those aged 25-44 have the highest penetration of outstanding debts
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- Figure 23: Types of outstanding debt held, by product type and age group, April 2008
- Financial pressures are high during the family years
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- Figure 24: Types of outstanding debt held, by product type and lifestage, April 2008
- ABs are most likely to have a mortgage
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- Figure 25: Types of outstanding debt held, by product type and socio-economic group, April 2008
- Two thirds in overdraft also have credit or store card debts
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- Figure 26: Types of outstanding debt held – cross-analysis, April 2008
- A quarter of borrowers make use of multiple credit facilities
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- Figure 27: Number of types of outstanding debt held (repertoire), April 2008
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- Figure 28: Types of outstanding debt held, by repertoire, April 2008
- Mortgagors and mid- to high earners tend to make use of several borrowing facilities
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- Figure 29: Repertoire of outstanding debt held, by gender, age, socio-economic group, lifestage, tenure and gross annual household income, April 2008
The Consumer – Level of Debt
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- Key points
- One in 20 mortgage holders owe more than £200,000
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- Figure 30: Amount of outstanding secured debt, 2007 and 2008
- The under-45s tend to have the highest mortgage balances
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- Figure 31: Amount of outstanding secured debt, by gender, age, socio-economic group, marital status, lifestage, working status, household income and tenure, April 2008
- Around one in eight borrowers have unsecured debts of over £10,000
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- Figure 32: Amount of outstanding unsecured debt, 2007 and 2008
- Those with large credit balances tend to use multiple borrowing facilities
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- Figure 33: Types of unsecured debt owned, by amounts outstanding, April 2008
- Pre-/no family individuals most susceptible to running up credit
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- Figure 34: Amount of outstanding unsecured debt, by gender, age, socio-economic group, marital status, lifestage, working status, household income and tenure, April 2008
- Two in five mortgage holders have insurance protection
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- Figure 35: Ownership of payment protection insurance products, by types of debt owned, April 2008
The Consumer – Current Financial Situation
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- Key points
- People are having to be more careful with their money
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- Figure 36: Current financial situation, 2006 and 2008
- The under-35s are the most hard-up
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- Figure 37: Current financial situation, by gender, age, socio-economic group, region, tenure and household income, April 2008
- Those with multiple debts tend to feel worse off
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- Figure 38: Current financial situation, by number of types of debt owned (repertoire), April 2008
- Those who are ‘always in debt’ or ‘struggling’ are least likely to have a mortgage
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- Figure 39: Types of outstanding debt owned, by current financial situation, April 2008
- Wealthy mortgage holders can more easily cope with a large mortgage
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- Figure 40: Amount of outstanding secured debt, by current financial situation, April 2008
- Those struggling have the highest debt levels
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- Figure 41: Amount of outstanding unsecured debt, by current financial situation, April 2008
The Consumer – Saving, Borrowing and Managing Money
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- Key points
- Merely half of all adults think they’re good at managing money
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- Figure 42: Agreement with statements about saving, borrowing and managing money, April 2008
- Nearly 3 million have debt worries
- People appear to be less sure of their financial capabilities than in the recent past
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- Figure 43: Agreement with statements about saving, borrowing and managing money, 2006 and 2008
- Debt worries plague the most hard-up
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- Figure 44: Agreement with statements about saving, borrowing and managing money, by current financial position, April 2008
- Those with multiple debts tend to keep a close eye on their bank balance
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- Figure 45: Agreement with statements about saving, borrowing and managing money, by number of debt types owned (repertoire), April 2008
- Reckless youth
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- Figure 46: Agreement with statements about saving, borrowing and managing money, by gender and lifestage, April 2008
- Wising up with age
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- Figure 47: Agreement with statements about saving, borrowing and managing money, by age group, April 2008
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- Figure 48: Agreement with selected statements about saving, borrowing and managing money, by age group, April 2008
- ABs are the most financially responsible
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- Figure 49: Agreement with statements about saving, borrowing and managing money, by socio-economic group, April 2008
- Demographic analysis summary
- Segmenting the population according to their approach to money
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- Figure 50: Money management clusters, April 2008
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- Figure 51: Composition of money management clusters, April 2008
- Credit-reliant
- Money Monitors
- Savvy Savers
- Cool & Aloof
- Accountants
- Credit-averse
- More than a quarter of Credit-reliant individuals are in overdraft
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- Figure 52: Types of outstanding debts held, by cluster, April 2008
- Savvy Savers are in the strongest financial position
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- Figure 53: Current financial situation, by cluster, April 2008
- A fifth of Credit-reliant individuals have run up unsecured debts of over £10,000
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- Figure 54: Amount of outstanding unsecured debt, by cluster, April 2008
- Accountants have the highest mortgage balances, on average
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- Figure 55: Amount of outstanding secured debt, by cluster, April 2008
The Consumer – Attitudes and Expectations
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- Key points
- A third of people expect house prices to fall over the next year
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- Figure 56: Agreement with statements about house prices, expected borrowing activity and related concerns, by tenure, April 2008
- A quarter plan to curtail their spending
- Owning property makes people feel more secure
- Concerns about the economy are shared by young and old alike
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- Figure 57: Agreement with statements about house prices, expected borrowing activity and related concerns, by age group, April 2008
- The less we earn, the more insecure we feel
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- Figure 58: Agreement with statements about house prices, expected borrowing activity and related concerns, by gross annual household income, April 2008
- One in ten who are ‘struggling’ plan to borrow (more)
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- Figure 59: Agreement with statements about house prices, expected borrowing activity and related concerns, by current financial situation, April 2008
- Those with multiple debts are keen to curb their spending
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- Figure 60: Agreement with statements about house prices, expected borrowing activity and related concerns, by number of types of debt owned (repertoire), April 2008
- Credit-reliant depend more on friends and family for financial back-up
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- Figure 61: Agreement with statements about house prices, expected borrowing activity and related concerns, by money management clusters, April 2008
- Further analysis
Appendix 1: Demographic Analysis of Debt Ownership
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- Figure 62: Types of outstanding debt held, by gender, age, socio-economic group, marital status, lifestage, and region, April 2008
- Figure 63: Types of outstanding debt held, by working status, household income, tenure, ACORN category, new technology usage, newspaper readership, commercial TV viewing and supermarket usage, April 2008
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Appendix 2: Profile of Money Management Clusters
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- Figure 64: Clusters, by gender, age, socio-economic group, marital status, lifestage, region and tenure, April 2008
- Figure 65: Clusters, by working status, household income, ACORN category, new technology usage, newspaper readership, commercial TV viewing and supermarket usage, April 2008
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