Table of Contents
Introduction
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- Report scope and product definitions
- Abbreviations
Executive Summary
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- The market
- Market nearing its trough?
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- Figure 1: Forecast of gross unsecured personal loan advances – fan chart, 2006-16
- Yet there’s limited scope for growth over the next few years
- Performance of related products
- Key factors
- Lenders have become more risk-averse
- PPI compensation hits lenders’ profits
- Regulatory developments
- Companies, brands and innovation
- The high street banks are the largest players in this market
- Recent innovation
- Limited advertising activity
- Distribution trends
- The consumer
- Trends in loan ownership
- Market penetration
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- Figure 2: Ownership of consumer credit and other lending products, August 2011
- Purchasing behaviour
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- Figure 3: Factors taken into consideration when buying loan, August 2011
- Sales channels used to arrange a loan
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- Figure 4: Channel used to apply for loan, August 2011
- PPI take-up
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- Figure 5: Take-up of PPI by unsecured loan holders, August 2011
- A significant minority of loan holders are struggling to keep up with their repayments
- Assessing future demand
- What we think
Issues in the Market
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- How has the loans market performed recently?
- What impact has the loss of competition had on the unsecured sector?
- Who are the main players in this market?
- Are there any areas of the market that are experiencing growth?
- And what are the market’s short-term prospects?
Future Opportunities
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- Offer ‘pure and simple’ terms to the more prudent customer
- Targeting the more social consumer
Internal Market Environment
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- Key points
- Margins increase as competitive pressures ease
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- Figure 6: Average advertised rates versus actual interest rate on personal loans, three-month LIBOR and base rate, 2004-11 (as at May)
- Proposed changes to consumer credit legislation
- Reform of PPI market
- The cost of PPI compensation
- PPI is the most complained about financial product
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- Figure 7: Number of new complaints cases, by product category, 2009-11
Broader Market Environment
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- Key points
- Summary of the main macroeconomic indicators impacting on the consumer credit market
- Low consumer confidence depresses demand for credit
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- Figure 8: GfK Consumer Confidence Barometer – UK, January 2004-October 2011
- Household unsecured debt has fallen by 11% over the 2008-11 period
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- Figure 9: The value of personal sector debt (mortgages and consumer credit) and as a proportion of total PDI, at current prices, 2000-11
- Most consumer debt write-offs relate to unsecured lending
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- Figure 10: Quarterly write-offs of lending to individuals, by sector, 2005-11
Competitive Context
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- Key points
- Rival products
- New gross consumer credit lending increases slightly in 2011
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- Figure 11: Gross consumer credit lending, by type, 2007-11
- Rise in net lending, albeit from a very small base
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- Figure 12: Net consumer credit lending, 2007-11
- MBBG loan balances continue to shrink
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- Figure 13: Amounts outstanding on overdrafts, credit cards and personal loans (MBBG only), September 2006-September 2011
- Contraction in the secured loan market is most acute
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- Figure 14: Value of new further advances and secured/homeowner loans, 2006-10
Strengths and Weaknesses in the Market
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- Figure 15: Unsecured personal loans – summary of strengths, weaknesses, opportunities and threats, 2011
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Who’s Innovating?
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- Key points
- Limited scope for product innovation in a contracting market
- Peer-to-peer lending and payday loans are the main growth areas
- Zopa launched the first online social lending site in 2005
- Other notable brands
- Key selling point
- Size of the market
- Payday loans are growing in prominence
- Size of the market
- Typical customer expenditure
- The target market
- Leading brands in this market
- Wonga distances itself from its payday loan rivals
Market Size and Forecast
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- Key points
- New advances on unsecured personal loans stabilises
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- Figure 16: New gross unsecured loan advances – MBBG and total market, 2006-11
- Mintel predicts a restrained and protracted recovery
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- Figure 17: The value of unsecured personal loans, by gross advances – fan chart, 2006-16
- Figure 18: Forecast of gross lending on unsecured personal loans, 2006-16
- Forecast methodology
- Fan chart explanation
Market Share
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- Key points
- Financial crisis led to a sharp contraction in the supply of loans
- Lloyds TSB is the largest loan provider
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- Figure 19: Value of unsecured consumer lending business outstanding (UK), by selected providers, 2009-10
Companies and Products
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- Barclays
- HSBC
- Lloyds Banking Group
- Nationwide Building Society
- RBS Group
- Grupo Santander
Brand Communication and Promotion
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- Key points
- Loan adspend increases in 2011, but is still way down on pre-crisis levels
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- Figure 20: Advertising expenditure on structured loan products, 2007-11
- Short-term loan provider Wonga tops the adspend rankings…
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- Figure 21: Top ten brands in the unsecured loans category, 2009-11
- … and invests heavily in TV and online advertising to promote its brand
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- Figure 22: Advertising expenditure on unsecured loans, by media type, 2009-11
Channels to Market
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- Key points
- Branch sales still dominate this market…
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- Figure 23: Method used for arranging loans, 2008-11
- … as most of the high street banks focus on targeting their existing customers…
- … although online sales are growing strongly
Patterns in Ownership and Purchase Motivation
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- Key points
- Loan penetration remains stable at 20%...
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- Figure 24: Personal loan ownership, 2008-11
- … although recent applicants account for a declining share of the overall customer base
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- Figure 25: Length of time ago loan was taken out, 2008-11
- Loan terms of four to five years are the most common
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- Figure 26: Length of loan term, 2011
- Loan holders typically borrow between £4K and £15K
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- Figure 27: Loan amount borrowed, 2011
- The top reason people take out a loan is to buy a car
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- Figure 28: Purpose of loan, 2008-11
The Target Market
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- Key points
- About Mintel’s consumer survey
- At least 6 million people in the UK have an unsecured personal loan
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- Figure 29: Ownership of consumer credit and other lending products, August 2011
- Many people have multiple lines of credit
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- Figure 30: Ownership of consumer credit and other lending products, by top four products, August 2011
- Customer segmentation
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- Figure 31: Segmentation of UK consumers by the type of debt they hold, August 2011
- 25-44-year-olds represent the main target market for loans
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- Figure 32: Ownership of consumer credit and other lending products, by age, August 2011
- The typical loan customer is a full-time employee in the family lifestage
Buying Behaviour
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- Key points
- Half of all loan holders shopped around their loan…
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- Figure 33: Shopped around for loan, August 2011
- … and of those who shopped around, half used a web aggregator
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- Figure 34: Used price comparison site, August 2011
- Merely one in three customers opted for the cheapest loan
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- Figure 35: Factors taken into consideration when buying loan, August 2011
- Most people arranged their loan in-branch or online
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- Figure 36: Channel used to apply for loan, August 2011
PPI Take-up
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- Key points
- Mortgages offer the highest PPI conversion rate
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- Figure 37: Take-up of PPI in relation to top five lending products, August 2011
- One in eight unsecured loan customers have PPI
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- Figure 38: Take-up of PPI in relation to personal unsecured loan, August 2011
Awareness and Usage of Peer-to-Peer Lending
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- Key points
- Peer-to-peer lenders still have some way to go to improve awareness
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- Figure 39: Usage and awareness of peer-to-peer lending sites, August 2011
- The under-35s are key to this market
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- Figure 40: Usage and awareness of peer-to-peer lending sites, by age, August 2011
- There’s scope to improve adoption rates by women
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- Figure 41: Usage and awareness of peer-to-peer lending sites, by gender and socio-economic group, August 2011
- Around one in four loan holders are unaware of these sites
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- Figure 42: Usage and awareness of peer-to-peer lending sites, by gender and age, August 2011
Current Financial Situation
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- Key points
- One in seven loan customers are struggling or in financial trouble
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- Figure 43: Current financial situation – all adults versus personal loan holders, August 2011
- More than two fifths of adults think they are worse off now than a year ago
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- Figure 44: Financial situation in comparison to a year ago – all adults versus personal loan holders, August 2011
- Just one in five loan holders are confident that they will be ‘okay’ financially over the coming year
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- Figure 45: Outlook for financial situation over the coming year – all adults versus personal loan holders, August 2011
- The downturn has had a major impact on more than one in four loan holders
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- Figure 46: Impact of economic downturn on own situation – all adults versus personal loan holders, August 2011
- Nearly one in three loan holders are putting their spare cash towards repaying debt
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- Figure 47: Discretionary spending choices – all adults versus personal loan holders, August 2011
Financial Plans and Priorities
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- Key points
- There are 880,000 potential new loan customers
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- Figure 48: Financial plans and priorities – all adults versus personal loan holders, August 2011
- Prospective loan customers tend to be aged under 35
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- Figure 49: Financial plans and priorities, by gender and age group, August 2011
Appendix – Ownership of Top Five Lending Products by Demographics
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- Figure 50: Top five lending products owned, by demographics, August 2011
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Appendix – Demographic Profile of Unsecured Loan Customers
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- Figure 51: Profile of unsecured personal loan holders versus the total sample, by demographics, August 2011
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Appendix – Demographic Segmentation of Customer Types
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- Figure 52: Segmentation of four customer types, by demographics, August 2011
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