Consumer Attitudes towards Debt - UK

The appetite for credit remains subdued as the majority of consumers continue to take a highly cautious and prudent approach to their finances. Consumer confidence remains fragile as the UK economy officially re-entered recession during Q1 2012, and ongoing fears about the future of the eurozone are doing little to improve sentiment. Against this backdrop, most consumers are unwilling to increase their exposure to debt, while a significant proportion have taken steps to reduce the amount that they owe.

However, despite the challenging conditions, consumers appear to be weathering the financial storm reasonably well. The proportion of consumers struggling with their finances has not increased, and there are signs that fewer people are failing to meet their financial commitments.
This report provides insight into the relationship between consumers and credit. It examines credit ownership in terms of the products used and the level of outstanding debt held. Attitudes towards credit and borrowing are considered, in terms of both personal debts and also from a wider perspective. The concept of responsible lending is also considered, offering some insight into the way in which consumers perceive lenders of different types of credit.
 

Introduction
Abbreviations
Fieldwork methodology

Executive Summary
Credit ownership
Seven in ten have outstanding credit
Figure 1: Types of credit held, May 2012
Some 30% have unsecured debts of more than £5,000
Figure 2: Outstanding unsecured debt, May 2012
Almost 50% with secured debts owe less than £70,000
Figure 3: Outstanding secured credit, May 2012
Trends in lending
Net unsecured lending remains subdued
Figure 4: Gross and net unsecured lending to individuals, January 2002-April 2012
Mortgage lending has stabilised
Levels of indebtedness appear to have fallen
Credit and the economic downturn
Most people are trying to avoid borrowing and credit
Figure 5: Impact of the economic downturn on attitudes towards debt and credit, May 2012
Attitudes towards credit
The majority see themselves as responsible users of credit
Figure 6: Attitudes towards own debts, May 2012
but have concerns about the way others use credit
Figure 7: Agreement with general attitudes towards debt, May 2012
Payday loan and door-to-door lenders are widely seen as irresponsible
Figure 8: Assessment of lender responsibility, by credit type, May 2012
What we think

Issues in the Market
Is the appetite for credit starting to return?
To what extent is the cautious consumer mindset here to stay?
Is consumer indebtedness getting worse?
Are people taking personal responsibility for their debts and financial situation?
To what extent are credit providers seen as responsible?

Future Opportunities
Selling the concept of credit to a more prudent generation
Don t be afraid to say no
Leading the way on responsible lending

Economic Outlook
Key points
Fears of a double-dip recession become a reality
Figure 9: UK GDP, Q1 2008-Q1 2012
Downturn in inflation should ease pressure on household budgets
Figure 10: RPI and average weekly earnings, 2006-12
Savings ratio fluctuates as households face inflationary pressures
Figure 11: Savings ratio, 2006-12 (Q1)
Unemployment rate has increased over the last 12 months
Figure 12: UK headline unemployment rate, 2008-12

Financial Wellbeing
Key points
Around one in ten are in some level of financial difficulty
Figure 13: Current financial situation, May 2012
Some signs of improvement in sentiment
Figure 14: Trends in current financial situation, November 2009-May 2012
Proportion struggling remains fairly consistent
More than a fifth are anxious about financial future
Figure 15: Consumer sentiment for the coming year, May 2012
Financial anxiety has increased
Figure 16: Trends in consumer sentiment for the coming year, November 2009-May 2012
More than 80% have been affected by the downturn
Figure 17: Impact of the economic downturn, May 2012
Impact of downturn has remained broadly consistent
Figure 18: Trends in the impact of the economic downturn, December 2009-May 2012

Consumer Credit Lending
Key points
Consumer credit lending is edging upwards
Figure 19: Gross and net unsecured lending to individuals, January 2002-April 2012
Credit cards are primarily used as a payment tool
Figure 20: Gross and net credit card lending, 2006-11 (seasonally adjusted)
Demand for other forms of consumer credit remains weak
Figure 21: Gross and net other consumer credit lending, 2006-11 (seasonally adjusted)

Mortgage Market Lending
Key points
Mortgage lending shows marginal increase in 2011
Figure 22: Gross and net mortgage lending, 2006-11 (seasonally adjusted)
Property still seen as a good long-term bet
Injection of housing equity continues
Figure 23: Housing equity withdrawal, 2005-12 (seasonally adjusted)

Write-offs, Repossessions and Arrears
Key points
Some stability in mortgage arrears and repossessions
Figure 24: Mortgage arrears and repossessions, Q1 2008-Q1 2012
but there are signs that repossessions could rise in the future
Write-offs fell by 30% in 2011
Figure 25: Write-offs of loans to individuals, 2006-11
Individual insolvencies appear to be in decline
Figure 26: The number of individual insolvencies in England and Wales, by type, Q2 2009-Q1 2012

Credit Ownership
Key points
Seven in ten have some form of outstanding credit
Figure 27: Types of credit held, May 2012
Nearly a quarter have three different types of outstanding credit
Figure 28: Repertoire of types of credit held, May 2012
Figure 29: Types of credit held, by repertoire of types of credit held, May 2012
Those with exposure to multiple forms of credit are more likely to be struggling
Figure 30: Current financial situation, by repertoire of types of credit held, May 2012
24-44-year-olds more likely to have several forms of credit

Level of Outstanding Debt
Key points
A third of those with unsecured debts owe less than £1,000
Figure 31: Outstanding unsecured debt, May 2012
Personal loan holders are more likely to owe at least £3,000
Figure 32: Types of credit held, by outstanding unsecured debt, May 2012
Ownership of multiple credit products leads to larger debt burden
Figure 33: Outstanding unsecured debt, by repertoire of types of credit held, May 2012
Link between financial health and unsecured debt
Figure 34: Outstanding unsecured debt, by current financial situation, May 2012
Only 6% of those with secured debts owe more than £200,000
Figure 35: Outstanding secured credit, May 2012
Figure 36: Outstanding secured credit, by annual household income, May 2012
Link between secured and unsecured debts
Figure 37: Outstanding unsecured debt, by outstanding secured credit, May 2012

Credit and the Economic Downturn
Key points
Seven in ten are trying to limit their exposure to credit
Figure 38: Impact of economic downturn on finances, May 2012
Even those in a good financial position are reluctant to use credit
Mortgage holders are more wary about using credit
Figure 39: Impact of economic downturn on finances, by most popular types of credit held, May 2012
Multiple credit holders are being more careful about their spending
Figure 40: Impact of economic downturn on finances, by repertoire of types of credit held, May 2012
Two fifths have actively tried to reduce their debts
Figure 41: Impact of the economic downturn on attitudes towards debt and credit, May 2012
Different age groups take different approaches to shore up their finances
Unsecured credit used to prop up household finances for the minority
Figure 42: Types of credit held, by impact of the economic downturn on attitudes towards debt and credit, May 2012
Multiple credit holders are keen to reduce their exposure to debt
Figure 43: Impact of the economic downturn on attitudes towards debt and credit, by repertoire of types of credit held, May 2012

Attitudes Towards Personal Debt
Key points
Credit users strive to be seen as responsible
Figure 44: Attitudes towards own debt(s), May 2012
but almost two fifths have some concerns about being in debt
The tipping point £3,000 in unsecured debts
Figure 45: Attitudes towards own debt(s), by outstanding unsecured debt, May 2012
Multiple credit users are more likely to have concerns
Figure 46: Attitudes towards own debt(s), by repertoire of types of credit held, May 2012
Forced borrowers are more likely to bury their heads
Figure 47: Attitudes towards own debt(s), by impact of the economic downturn on attitudes towards debt and credit, May 2012

General Attitudes Towards Debt and Credit
Key points
A strong sense that credit is often used for the wrong reasons
Figure 48: General attitudes towards debt and credit, May 2012
There is a time and a place to use credit
Older consumers are more concerned about the use of credit
Figure 49: General attitudes towards debt and credit, by age, May 2012
Higher earners are more likely to see positive benefits of credit
Figure 50: General attitudes towards debt and credit, by annual household income, May 2012
Credit is still seen as too accessible
Figure 51: Agreement with statement It's too easy to get hold of credit and borrow money , by current financial situation, May 2012

Assessment of Lender Responsibility
Key points
Positive and negative perceptions of the credit market
Figure 52: Assessment of lender responsibility, by credit type, May 2012
Overdrafts are seen as most responsible form of consumer credit
Figure 53: Assessment of lender responsibility, by selected types of consumer credit, May 2012
Consumers are highly critical of the payday loan market
However, some consumers can see the benefit of payday loans
Credit holders are more likely to see lenders as responsible
Figure 54: Assessment of lender responsibility, by credit type, by ownership of credit products, May 2012
Multiple credit holders have a mixed view of the market
Figure 55: Assessment of lender responsibility, by credit type, by repertoire of types of credit held, May 2012

Appendix Credit Ownership
Figure 56: Most popular types of credit held, by demographics, May 2012
Figure 57: Next most popular types of credit held, by demographics, May 2012
Figure 58: Other types of credit held, by demographics, May 2012
Figure 59: Repertoire of types of credit held, by demographics, May 2012

Appendix Level of Outstanding Debt
Figure 60: Outstanding unsecured debt, by demographics, May 2012
Figure 61: Outstanding secured credit, by demographics, May 2012

Appendix Credit and the Economic Downturn
Figure 62: Agreement with the statements It has had no impact on the way I manage my money and I spend money more carefully than I used to , by demographics, May 2012
Figure 63: Agreement with the statements I keep a closer eye on my finances in general and I try not to borrow money or use credit , by demographics, May 2012
Figure 64: Impact of the economic downturn on attitudes towards debt and credit, by demographics, May 2012

Appendix Attitudes Towards Personal Debt
Figure 65: Agreement with the statements I feel comfortable with the amount of debt that I have and I have concerns about my level of debt , by demographics, May 2012
Figure 66: Agreement with the statements I try to not think about my debts and I use credit in a responsible way , by demographics, May 2012
Figure 67: Agreement with the statement I focus more on how much I m repaying each month, rather than on the total amount I owe , by demographics, May 2012

Appendix General Attitudes Towards Debt and Credit
Figure 68: Most popular general attitudes towards debt and credit (any agree), by demographics, May 2012
Figure 69: Next most popular general attitudes towards debt and credit (any agree), by demographics, May 2012

Appendix Assessment of Lender Responsibility
Figure 70: Assessment of mortgage lender responsibility, by demographics, May 2012
Figure 71: Assessment of credit card provider responsibility, by demographics, May 2012
Figure 72: Assessment of store card provider responsibility, by demographics, May 2012
Figure 73: Assessment of payday loan provider responsibility, by demographics, May 2012
Figure 74: Assessment of overdraft provider responsibility, by demographics, May 2012
Figure 75: Assessment of unsecured personal loan provider responsibility, by demographics, May 2012
Figure 76: Assessment of student loan responsibility, by demographics, May 2012
Figure 77: Assessment of homeowner/secured loan provider responsibility, by demographics, May 2012
Figure 78: Assessment of door-to-door loan provider responsibility, by demographics, May 2012