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Consumer Attitudes Towards Debt - UK - July 2014

INTRODUCTION
Definitions
Abbreviations
Fieldwork methodology
EXECUTIVE SUMMARY
Trends in lending
Strong growth in consumer credit throughout 2013
Figure 1: Gross and net unsecured lending to individuals, excluding student loans, January 2005 – April 2014
Housing market exploded into life last year
Figure 2: Gross and net secured lending advances, 2009-13 (not seasonally adjusted)
Credit ownership
Seven in ten have at least one form of debt
Figure 3: Credit product ownership, May 2014
Nearly a fifth owe more than £5,000 of unsecured debt
Figure 4: Level of outstanding unsecured debt, May 2014
Level of comfort with debt and appetite for credit
Most people are comfortable with their current debts
Figure 5: Level of comfort with amount of debt, May 2014
Three quarters are comfortable with their repayments
Figure 6: Level of comfort with debt repayments, May 2014
Less than a fifth plan to borrow next year
Figure 7: Borrowing plans for the next 12 months, May 2014
Attitudes towards credit and debt
Consumers are still wary of debt
Figure 8: Preference to save or pay off debt, May 2014
Figure 9: Preference for shorter or longer repayment schedules, May 2014
Consumers believe lenders should give more assistance to struggling borrowers
Figure 10: Attitudes towards debt management, May 2014
What we think
ISSUES AND INSIGHTS
Informal borrowers highlight exclusion from traditional lending
The facts
The implications
Consumers can be judgmental about other people’s approach to debt
The facts
The implications
Rising interest, rising worries?
The facts
The implications
TREND APPLICATION
Be proactive to help borrowers help themselves
Credit can fund life events, not just delay them
Accessibility is key to getting advice to young people
ECONOMIC OUTLOOK
Key points
Sustained growth finally takes hold
Figure 11: Quarterly change in GDP, 2009 Q1 – 2014 Q1
Wages still squeezed despite falling inflation
Figure 12: Annual % change in average weekly earnings, CPI and RPI, March 2009 – May 2014
Consumer appetite to save increases but remains low
Figure 13: Savings ratio, 2008 Q1 – 2013 Q4
Encouraging drop in unemployment rate
Figure 14: Total UK unemployment rate, January 2008 – April 2014
Low interest rates have increased appeal of personal loans
Figure 15: UK interest rates, January 2009 – March 2014
Rate rises on the horizon
CONSUMER FINANCIAL WELLBEING
Key points
Most people are getting by, but there’s no improvement at the bottom
Figure 16: Trend in consumer financial situation, June 2009-June 2014
One in four people’s finances improved in the last year
Figure 17: Trend in consumer finances compared to a year ago, June 2009-June 2014
Most expect to be OK over the next year
Figure 18: Trend in consumer sentiment for the coming year, June 2009 – June 2014
CONSUMER CREDIT LENDING
Key points
Gross lending on the rise
Figure 19: Gross and net unsecured lending to individuals, excluding student loans, January 2005 – April 2014
Big growth in net credit card lending
Figure 20: Gross and net credit card lending, 2009-13 (not seasonally adjusted)
Other consumer credit explodes back into life
Figure 21: Gross and net other consumer credit lending (excluding student loans), 2009-13 (not seasonally adjusted)
MORTGAGE MARKET LENDING
Key points
Big growth in gross mortgage lending
Figure 22: Gross and net secured lending advances, 2009-13 (not seasonally adjusted)
House prices are up, but so are approvals
Figure 23: Monthly mortgage approvals for home-buying, January 2009 – April 2014
Housing equity withdrawal is still unfashionable
Figure 24: Housing equity withdrawal, December 2005 – December 2013
MMR could put a brake on growth
WRITE-OFFS, REPOSSESSIONS AND ARREARS
Key points
Mortgage arrears and repossessions steadily fall
Figure 25: Number of mortgages in arrears of 2.5% or more and repossessions, Q1 2009 – Q1 2014
Increase in mortgage write-offs bucks the trend
Figure 26: Value of write-offs to loans to individuals, 2009-13
Decrease in insolvencies continues
Figure 27: The number of individual insolvencies in England and Wales, by type, Q1 2008 – Q1 2013
CREDIT PRODUCT OWNERSHIP
Key points
Credit cards are the most commonly-held credit products
Figure 28: Credit product ownership, May 2014
Debt ownership reduces with age
Figure 29: Credit product ownership, by age, May 2014
Figure 30: Mortgage ownership, by age, May 2014
A quarter have four or more outstanding debts
Figure 31: Number of different types of credit on which money is owed, May 2014
Figure 32: Credit product ownership, by number of types of credit held, May 2014
LEVEL OF OUTSTANDING UNSECURED CREDIT
Key points
Debt levels are largely unchanged
Figure 33: Level of outstanding debt, 2012-14
Most owe less than £3,000
Mortgages are more common among those with larger debts
Figure 34: Ownership of selected credit products, under £1,000 owed vs over £1,000 owed, May 2014
LEVEL OF COMFORT WITH PERSONAL DEBT
Key points
Most people are comfortable with what they owe…
Figure 35: Level of comfort with amount of debt, May 2014
… and things have improved since last year
Figure 36: Level of comfort with amount of debt, 2013-14
Nearly half with informal debts are uncomfortable with their debt
Figure 37: Level of comfort with personal debt, by debt product ownership, May 2014
Securities stave off discomfort
Student loan-holders are less comfortable than the average
Discomfort with debt peaks at 35-44…
Figure 38: People who are uncomfortable with the amount that they owe, by age group, May 2014
… and increases with the more debt that is held
Figure 39: Level of comfort with personal debt, by level of outstanding unsecured debt, May 2014
LEVEL OF COMFORT WITH DEBT REPAYMENTS
Key points
Over three quarters are comfortable with their repayments
Figure 40: Level of comfort with debt repayments, May 2014
Having any significant savings provides peace of mind
Figure 41: Level of comfort with debt repayments, by amount held in savings and investments, May 2014
Higher debts, higher worries
Figure 42: Level of outstanding debt, by level of comfort with debt repayments, May 2014
Eight in ten mortgage holders are comfortable with their debt repayments…
Figure 43: Level of comfort with debt repayments, by debt product ownership, May 2014
... but less informal borrowers feel less content
A fifth of those struggling with payments are comfortable with their overall debt
Figure 44: Level of comfort with debt repayments, by level of comfort with amount of outstanding debt, May 2014
APPETITE FOR BORROWING/USING CREDIT
Key points
Appetite for borrowing remains low
Figure 45: Borrowing plans for the next 12 months, May 2014
Younger people are more likely to borrow
Figure 46: Percentage of consumers who are likely to borrow in the next 12 months, by age, May 2014
Higher appetite among well-off and hard-up
Borrowers with high-cost debts are most likely to borrow again
Figure 47: Borrowing plans for the next 12 months, by debt product ownership, May 2014
A fifth of likely borrowers are already uncomfortable with their debt…
Figure 48: Consumers who said “Yes it is likely that I will borrow money and/or use new credit products in the next 12 months”, by level of comfort with personal debt, May 2014
Credit cards top of the list of credit products that people are likely to use
Figure 49: Credit products that people plan to borrow from in the next 12 months, May 2014
ATTITUDES TOWARDS MONEY MANAGEMENT
Key points
Likely borrowers are still generally wary of debt
Figure 50: Attitudes towards debt and money management, May 2014
Plans can wait, debt comes first
Debt is still a taboo for many…
Figure 51: Preference for borrowing from informal or formal lenders, by age group, May 2014
ATTITUDES TOWARDS DEBT MANAGEMENT
Key points
Consumers want lenders to give more support…
Figure 52: Attitudes towards debt management, May 2014
… but they expect debtors to pay what they owe
Borrowers are confident they’d know what to do in difficulty
Figure 53: Awareness of where to find professional advice/guidance about debt issues, by age, May 2014
People should insure their debt, but don’t
Consumers are split on what their priority should be
APPENDIX – CREDIT PRODUCT OWNERSHIP
Figure 54: Credit product ownership, by demographics, May 2014
Figure 55: Credit product ownership (continued), by demographics, May 2014
Figure 56: Credit product ownership (continued), by demographics, May 2014
Repertoire of credit product ownership
Figure 57: Number of credit products owned, by demographics, May 2014
APPENDIX – LEVEL OF OUTSTANDING UNSECURED DEBT
Figure 58: Levels of outstanding unsecured debt, by demographics, May 2014
Figure 59: Levels of outstanding unsecured debt (continued), by demographics, May 2014
Figure 60: Levels of outstanding unsecured debt (continued), by demographics, May 2014
APPENDIX – LEVEL OF COMFORT WITH PERSONAL DEBT
Figure 61: Level of comfort with personal debt, by demographics, May 2014
Figure 62: Level of comfort with personal debt, by demographics, May 2014 (continued)
APPENDIX – LEVEL OF COMFORT WITH DEBT REPAYMENTS
Figure 63: Level of comfort with debt repayments, by demographics, May 2014
Level of comfort with debt repayments, by credit product ownership
Figure 64: Level of comfort with debt repayments, by credit product ownership, May 2014
Figure 65: Level of comfort with debt repayments, by credit product ownership (continued), May 2014
APPENDIX – APPETITE FOR BORROWING/USING CREDIT
Figure 66: Borrowing plans for the next 12 months, by demographics, May 2014
Figure 67: Credit products that people plan to borrow from in the next 12 months, by demographics, May 2014
Figure 68: Credit products that people plan to borrow from in the next 12 months (continued), by demographics, May 2014
Figure 69: Credit products that people plan to borrow from in the next 12 months (continued), by demographics, May 2014
Level of comfort with debt repayments, by borrowing plans for the next 12 months
Figure 70: Level of comfort with debt repayments, by borrowing plans for the next 12 months, May 2014
APPENDIX – ATTITUDES TOWARDS MONEY MANAGEMENT
Figure 71: Attitudes towards debt – ‘I would prioritise saving over paying off debt’ versus ‘I would prioritise paying off debt over saving’, by demographics, May 2014
Figure 72: Attitudes towards debt – ‘I would feel comfortable buying something on credit rather than saving up for it’ versus ‘I would feel uncomfortable buying something on credit rather than saving up for it’, by demographics, May 2014
Figure 73: Attitudes towards debt – ‘I would prefer to make larger monthly/weekly repayments to pay back debt/credit as quickly as possible’ versus ‘I would prefer to make smaller weekly/monthly repayments over a longer period of time’, by demographics, May 2014
Figure 74: Attitudes towards debt – ‘I would feel more comfortable borrowing money from family or friends than a formal lender’ versus ‘I would feel more comfortable borrowing money from a formal lender than from family or friends’, by demographics, May 2014
Figure 75: Attitudes towards debt – ‘I would be happy to make major commitments or decisions without clearing my debts/credit first’ versus ‘I wouldn’t be happy to make any major commitments or decisions without clearing my debits/credit first’, by demographics, May 2014
Figure 76: Attitudes towards debt – ‘I am generally wary of taking out debt and credit’ versus ‘I am not generally wary of taking out debt/credit’, by demographics, May 2014
APPENDIX – ATTITUDES TOWARDS DEBT MANAGEMENT
Figure 77: Agreement with the statement ‘I think it’s unfair to expect people to repay any debts if they’re no longer able to afford it’, by demographics, May 2014
Figure 78: Agreement with the statement ‘It is irresponsible to not take precautions such as an insurance policy to cover your debts in the event of being unable to pay them’, by demographics, May 2014
Figure 79: Agreement with the statement ‘I know where I could go for professional advice if I needed help and guidance about debt issues’, by demographics, May 2014
Figure 80: Agreement with the statement ‘I would rather damage my credit rating by missing a debt repayment than significantly change my lifestyle to meet my commitments’, by demographics, May 2014
Figure 81: Agreement with the statement ‘If I could only afford to pay one, I would rather keep up with my debt repayments than pay my utility bills’, by demographics, May 2014
Figure 82: Agreement with the statement ‘I would be willing to pay for debt management services’, by demographics, May 2014
Figure 83: Agreement with the statement ‘credit companies should provide more assistance for customers in difficulty’, by demographics, May 2014

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