Table of Contents
Overview
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- What you need to know
- Definitions
Executive Summary
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- The market
- Low rates mean credit is still attractive despite gathering clouds
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- 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
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- Figure 3: The financial confidence index, January 2016 – May 2017
- Gross consumer credit lending reached £260.2 billion in 2016
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- 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
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- Figure 6: Credit product ownership, May 2017
- Micro-debts have increased in the last year
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- Figure 7: Amount owed on unsecured credit products, May 17
- Paying off debt is the priority for most
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- Figure 8: Plans for credit use/repayment in the next two years, May 2017
- Consumers are largely undecided on the impact of Brexit
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- 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
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- Figure 10: Attitudes towards debt, May 2017
- Credit cards are the favoured form of credit
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- Figure 11: Preferred form of credit for different purchases, May 2017
- What we think
Issues and Insights
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- 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
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- 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
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- GDP growth fell to 0.2% in Q1 2017
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- Figure 12: Gross domestic product, quarterly change (seasonally adjusted), Q1 2012 – Q1 2017
- Rising prices put the squeeze on consumers…
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- Figure 13: Annual inflation rate, RPI and CPI, Q3 2007 – Q1 2017
- …as wage growth fell last year
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- Figure 14: Annual wage growth, UK, 2007-2016
- Interest rates remain attractive for borrowers
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- Figure 15: UK interest rates, January 2012 – May 2017
- Unemployment fell throughout 2016
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- Figure 16: UK unemployment rate, Q3 2007 – Q1 2017
- A note on Brexit
Consumer Financial Well-being
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- Inflation has hit financial well-being
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- Figure 17: The financial well-being index, January 2016 – May 2017
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- Figure 18: Current financial situation, May 2017
- Most consumers’ finances are about the same as last year…
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- Figure 19: Changes in household finances, January 2016 – May 2017
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- Figure 20: Changes in household finances, May 2017
- … but confidence for next year is dropping
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- Figure 21: The financial confidence index, January 2016 – May 2017
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- Figure 22: Consumer sentiment for the coming year, May 2017
Consumer Credit Lending
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- Gross lending continues to grow
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- 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
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- Figure 24: Annual gross and net credit card lending, not seasonally adjusted, 2010-2016
- Growth in loan lending is expected to slow
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- Figure 25: Annual gross and net other consumer credit lending, not seasonally adjusted, 2010-2016
Mortgage Market Lending
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- Mortgage lending was boosted by a surge in BTL sales in 2016
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- Figure 26: Gross and net mortgage lending, not seasonally adjusted, 2012-16
- Mortgage approvals fell after the EU referendum
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- Figure 27: Quarterly number of mortgage approvals, by purpose, not seasonally adjusted, Q1 2012 – Q1 2017
Write-offs, Repossessions and Insolvencies
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- Write-offs fall despite credit card rise
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- Figure 28: Value of write-offs to loans to individuals, not seasonally adjusted, 2012-16
- Mortgage arrears and repossessions stable through 2016
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- Figure 29: Quarterly repossessions and mortgage arrears (at least 2.5%), Q1 2012 – Q1 2017
- Rise in IVAs fuels increase in all insolvencies
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- Figure 30: Individual insolvencies in England and Wales, by type, not seasonally adjusted, 2012-16
- Online bankruptcies help to remove stigma
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- Figure 31: Individual bankruptcies in England and Wales, by petition type, not seasonally adjusted, 2012-16
The Consumer – What You Need to Know
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- 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
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- 61% of consumers have outstanding unsecured debts
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- Figure 32: Credit product ownership, May 2016 vs May 2017
- 25-44-year-olds are the most likely to have unsecured debt
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- Figure 33: Credit product ownership, by age, May 2017
- Hard-up consumers most likely to use an overdraft or borrow from peers
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- 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
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- 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
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- Micro-debts have increased in the last year
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- Figure 37: Amount owed on unsecured credit products, 2012-17
- More well-off consumers more likely to have larger unsecured debts
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- Figure 38: Amount owed on unsecured credit products, by gross annual household income, May 2017
Expected Debt Situation in the Next Two Years
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- Paying off debt is the priority for most
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- 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
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- Figure 40: Plans for credit use/repayment in the next two years, by amount owed on unsecured credit products, May 2017
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- Figure 41: Plans for credit use/repayment in the next two years, by unsecured credit product ownership, May 2017
Anticipated Effects of Brexit
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- Consumers are largely undecided on the impact of Brexit
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- 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
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- Cost is key when choosing a credit product...
- … but brand is still a factor
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- 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...
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- 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
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- 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
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- 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
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- Credit cards are the favoured form of credit for almost all needs…
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- 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
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- Figure 48: Future use of credit products – “Any type of credit”, by age, May 2017
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
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