Table of Contents
Executive Summary
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- The market
- Growth in unsecured debt stalls
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- Figure 1: Total unsecured household debt, January 2010-April 2019
- Growth in secured lending also slows
- Economic growth slows but wages grow
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- Figure 2: Inflation versus average weekly earnings, May 2016-May 2019
- Uncertainty about the direction and timing of interest rates
- Insolvencies grow 45% since 2015
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- Figure 3: Value of write-offs for individuals, 2009-18
- FCA seeks to take on unfair credit markets
- Advertising expenditure on debt products returns to growth
- The consumer
- Two thirds hold some form of debt product
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- Figure 4: Types of credit owned, June 2019
- 45% of unsecured borrowers owe more than £2,000
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- Figure 5: Amount of unsecured debt held, by age group, June 2019
- 28% have seen the amount of unsecured debt they hold increase
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- Figure 6: Changes in the amount of unsecured debt, June 2019
- Borrowers are optimistic of reducing the amount they owe
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- Figure 7: Debt intentions, June 2019
- Everyday spending is the most common reason to get into debt
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- Figure 8: Reasons for taking on debt, June 2019
- 55% of Older Millennials have borrowed to pay off debts
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- Figure 9: Debt consolidation, June 2019
- More than a quarter are uncomfortable with their debts
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- Figure 10: Comfort with level of debt, June 2019
- Debt and mental health
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- Figure 11: Attitudes towards debt, June 2019
- What we think
Issues and Insights
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- Addressing concern over the impact of debt on mental health
- The facts
- The implications
- Good household finances but poor economic outlook causes credit growth to stall
- The facts
- The implications
The Market – What You Need to Know
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- Growth in unsecured debt stalls
- Growth in secured lending also slows
- Uncertainty over the timing and direction of interest rates
- Economic growth slows but wages grow
- Insolvencies grow 45% since 2015
- FCA takes on unfair credit markets
- Advertising expenditure on debt products returns to growth
Unsecured Debt
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- Growth in unsecured debt stalled in 2018
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- Figure 12: Total unsecured household debt, January 2010-April 2019
- But as a proportion of household spending it remains lower
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- Figure 13: Outstanding unsecured household debt as a proportion of total household expenditure, Q1 2019-Q4 2018
- New lending slowed in 2018
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- Figure 14: Consumer credit excluding student loans, net lending, seasonally adjusted, May 2017-April 2019
Secured Debt
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- Growth in secured lending slows
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- Figure 15: Gross mortgage lending, not seasonally adjusted, 2009-18
- Lending for remortgages grows faster than house purchases
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- Figure 16: Value of approvals for lending to individuals, not seasonally adjusted, 2009-18
Cost of Debt
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- Uncertainty about the timing and direction of interest rate rises
- Credit cards become more expensive than overdrafts
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- Figure 17: UK interest rates on unsecured credit products, June 2017-May 2019
- Variable mortgage rates start to rise
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- Figure 18: Owner occupied mortgage rates, based on 75% LTV ratio, June 2017-May 2019
Economic Outlook
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- GDP growth slows
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- Figure 19: GDP, quarterly % change (seasonally adjusted), Q1 2013-Q1 2019
- Rising wages and low inflation provide breathing space for households
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- Figure 20: Inflation versus average weekly earnings, May 2016-May 2019
- Unemployment continues to fall
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- Figure 21: UK unemployment rate (seasonally adjusted), Q1 2010-Q1 2019
- Consumers remain upbeat
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- Figure 22: Consumers’ financial wellbeing, three month moving average, January 2017-May 2019
- Housing transactions slow
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- Figure 23: Annual change in residential housing transactions over £40,000 (non-seasonally adjusted, calendar year), 2009-18
- New and used car sales fall
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- Figure 24: Volume of new car registrations and used car sales via dealers, 2013-18
Write-offs, Repossessions and Insolvencies
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- Write-offs increased in 2018
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- Figure 25: Value of write-offs for individuals, 2009-18
- Mortgage arrears continue to fall
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- Figure 26: Quarterly mortgage arrears (at least 2.5%) and repossessions, Q1 2016-Q1 2019
- IVAs contribute to the fastest growth in insolvencies for a decade
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- Figure 27: Number of individual insolvencies, 2009-18
Regulatory and Legislative Changes
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- Indebted households to get breathing space
- Fixing a dysfunctional overdraft market
- New rules on buy now pay later products
- Reviewing the credit information market
Advertising and Marketing Activity
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- Adspend recovers following a dip in 2017/18
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- Figure 28: Total above-the-line, online display and direct mail advertising expenditure on credit products, 2014/15-2018/19
- Barclaycard is the biggest spender
- BGL Group runs first credit campaign
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- Figure 29: Leading spenders on above-the-line, online display and direct mail advertising expenditure on credit products, 2018/19
- Advertising spend on credit products becomes more mixed
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- Figure 30: Total spending on above-the-line, online display and direct mail advertising expenditure on selected unsecured credit products, 2014/15-2018/19
- Pulling back from digital
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- Figure 31: Total spending on above-the-line, online display and direct mail advertising expenditure on credit products, by media type, 2014/15-2018/19
- Campaign highlights
- Barclaycard uses Simon Cowell to promote its repayment calculator
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- Figure 32: Simon Cowell and Barclaycard, April 2019
- Halifax gives ‘That New Home Feeling’
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- Figure 33: Halifax makes it happen, April 2019
- NatWest promotes paperless mortgage applications
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- Figure 34: NatWest – Making banking easier advert, January 2019
- Comparethemarket.com introduces AutoSergei
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- Figure 35: AutoSergei advert with credit card EligibilityCheck, April 2019
- Hell or Habito
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- Figure 36: ‘Hell or Habito’ advertising campaign, March 2019
- Nielsen Ad Intel coverage
The Consumer – What You Need to Know
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- Two thirds hold some form of debt product
- 45% of unsecured borrowers owe more than £2,000
- Fewer people have paid down debts
- Borrowers are optimistic of reducing the amount they owe
- Everyday spending is the most common reason to get into debt
- 55% of Older Millennials have borrowed to pay off debts
- More than a quarter are uncomfortable with their debts
- Debt and mental health
Types of Credit Held
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- Two thirds hold some form of debt product
- Universal view of credit cards
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- Figure 37: Types of credit owned, June 2019
- Younger people taking on payday loans and instant credit
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- Figure 38: Types of credit owned, by average age and socio-economic group, June 2019
- Over three quarters of 25-34 year olds have unsecured debt
- Debt-free over 65
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- Figure 39: Types of credit owned (net), by age group, June 2019
- Multiple credit products offer opportunities to simplify the experience
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- Figure 40: Repertoire analysis of credit products held, by age group, June 2019
Value of Unsecured Debt
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- 45% owe more than £2,000
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- Figure 41: Amount of unsecured credit held, by age group, June 2019
- Those with payday loans and instant credit among the most indebted
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- Figure 42: Amount of unsecured credit held, by credit products owned, June 2019
- Londoners are most likely to owe more than £10,000
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- Figure 43: Over £10,000 in unsecured debt, by region, June 2019
Changes in Debt Situation
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- Fewer people have paid down debts
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- Figure 44: Changes in the amount of unsecured debt, June 2018/ June 2019
- Under-45s taking on debt while over-45s are paying it off
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- Figure 45: Changes in the amount of unsecured debt, by age group, June 2019
Debt Intentions
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- Three quarters expect to pay down debts in the next two years
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- Figure 46: Debt intentions, June 2018/June 2019
- The psychological importance of momentum
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- Figure 47: Debt intentions, by changes in debt situation, June 2019
Reasons for Taking on Debt
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- Everyday spending is the main cause of unsecured debt
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- Figure 48: Reasons for taking on debt, June 2019
- Young people get into debt setting up in life
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- Figure 49: Reasons for taking on debt, by age and SEG, June 2019
- Those who plug the gap in living costs have the lowest level of debt
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- Figure 50: Reasons for taking on debt, by value of unsecured debt, June 2019
Debt Consolidation
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- Half of Millennials borrow to pay off debts
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- Figure 51: Debt consolidation, by age group, June 2019
- Unplanned borrowing is least likely to be consolidated
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- Figure 52: Debt consolidation, by reasons for getting into debt, June 2019
Comfort with Level of Debt
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- 28% are uncomfortable with their current level of debt
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- Figure 53: Comfort with level of debt, by age and gender, June 2019
- New overdraft rules to help those who are least comfortable
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- Figure 54: Uncomfortable with their current level of debt, by type of loan product held, June 2019
- Those who borrow for specific things are most comfortable
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- Figure 55: Reasons for taking on debt, by comfort with current level of debt, June 2019
Attitudes towards Debt
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- Debt and mental health
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- Figure 56: Attitudes towards financial wellbeing, June 2019
- Making credit work
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- Figure 57: Attitudes towards managing debt, June 2019
- Over half think a rise in interest rates would be bad news
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- Figure 58: Attitudes towards getting into debt, June 2019
- The generational divide
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- Figure 59: Attitudes towards debt, by age group, June 2019
Target Group Analysis
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- Figure 60: Target group analysis, June 2019
- Savvy Borrowers
- Wary Debtors
- Quietly Concerned
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Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
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