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Consumer Attitudes towards Debt - UK

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Published Date: Jul, 2013
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  • Abstract
  • Table of Contents

“Online budgeting tools have significant potential for growth. Just over half of the internet population show an interest in using this type of service in the future. Under-45s and higher earners are much more likely than average to see the appeal of tools that help them to keep track of their finances.”

Some questions answered in this report include:

Are consumers starting to feel more confident about borrowing?
Who are the key targets for credit providers?
How has credit ownership changed in the last two years?
How comfortable are people with their existing debts?
How interested are consumers in using money management and budgeting tools?

INTRODUCTION
Abbreviations
Fieldwork methodology
EXECUTIVE SUMMARY
Trends in lending
Consumer credit lending increased in 2012
Figure 1: Gross and net unsecured lending to individuals, January 2004-May 2013
Mortgage lending remains flat in 2012
Figure 2: Gross and net mortgage lending, 2007-12 (seasonally adjusted)
Credit ownership
Three quarters owe money on some form of credit
Figure 3: Types of credit on which money is owed, April 2013
Level of debt and appetite for credit
A fifth are planning to use credit over the next 12 months
Figure 4: Expected use of credit over the next 12 months, April 2013
Most people are coping with their debts
Figure 5: Level of outstanding unsecured debt, April 2013
Two fifths have seen their debts increase over the last three years
Figure 6: Change in debt levels over the last three years, April 2013
Attitudes towards credit and debt
Negative views of using credit persist
Figure 7: Attitudes towards borrowing money and debt, April 2013
Scope to expand money management and budgeting activities
Figure 8: Consumer interest in using money management and budgeting tools, April 2013
What we think
ISSUES IN THE MARKET
Are consumers starting to feel more confident about borrowing?
Who are the key targets for credit providers?
How has credit ownership changed in the last two years?
How comfortable are people with their existing debts?
How interested are consumers in using money management and budgeting tools?
TREND APPLICATION
A new approach to short-term finance
Helping people to see positive uses for credit
Generation Next will take a different approach to credit
ECONOMIC OUTLOOK
Key points
Uncertainties continue to undermine the economic recovery…
Figure 9: UK GDP, Q1 2008-Q1 2013
… but there are some grounds for optimism
Savings ratio falls in the first quarter of 2013
Figure 10: Saving ratio, Q1 2007-Q1 2013
Wage growth stagnation has eroded spending power
Figure 11: RPI and weekly average earnings. 2008-13
Unemployment rate stable at around 8%
Figure 12: UK headline unemployment rate, 2007-13
CONSUMER FINANCIAL WELLBEING
Key points
Little change in consumer financial health
Figure 13: Trend in consumer financial situation, June 2009- June 2013
Most people are treading water…
Figure 14: Trend in financial situation compared to a year ago, December 2011- June 2013
… but are less anxious about the future
Figure 15: Trends in consumer sentiment for the coming year, June 2009-June 2013
CONSUMER CREDIT LENDING
Key points
Consumer credit lending continues to pick up
Figure 16: Gross and net unsecured lending to individuals, January 2004-May 2013
Credit card spending continues to edge upwards
Figure 17: Gross and net credit card lending, 2006-12 (seasonally adjusted)
Demand for other consumer credit begins to recover
Figure 18: Gross and net other consumer credit lending (excluding student loans), 2006-12 (seasonally adjusted)
MORTGAGE MARKET LENDING
Key points
Mortgage lending flat in 2012…
Figure 19: Gross and net mortgage lending, 2007-12 (seasonally adjusted)
… but some signs up an upturn in early 2013
Housing equity withdrawal remains in negative territory
Figure 20: Housing equity withdrawal, 2006-12
WRITE-OFFS, REPOSSESSIONS AND ARREARS
Key points
Mortgage arrears and repossessions level off…
Figure 21: Mortgage arrears and repossessions, Q1 2009-Q1 2013
… but forbearance could be masking payment difficulties
Interest-only time bomb
Loan write-offs also on the decline
Figure 22: Write-offs of loans to individuals, 2007-12
Individual insolvencies in decline
Figure 23: The number of individual insolvencies in England and Wales, by type, Q1 20043-Q1 2-13
CONSUMER SEGMENTATION – ATTITUDES TOWARDS DEBT AND CREDIT
Key points
Negative attitudes towards debt persist
Figure 24: Attitudes towards borrowing money and debt, April 2013
The financially secure more likely to acknowledge the positive uses of credit
Dividing the online population by attitudes towards credit and debt
Figure 25: Consumer segmentation, April 2013
Sophisticated financial planners
32% of online population
Demographic traits
Marketing perspective
Concerned but responsible credit users
37% of online population
Demographic traits
Marketing perspective
Anti-credit critics
14% of online population
Demographic traits
Marketing perspective
Inattentive credit users
17% of the online population
Demographic traits
Marketing perspective
Figure 26: Agreement with attitudes towards borrowing money and debt, by consumer segmentation, April 2013
CREDIT OWNERSHIP
Key points
Most people owe money on some form of credit
Figure 27: Types of credit on which money is owed, 2011- 13
Indications that more people are using consumer credit
Payday loans are gaining traction in the consumer credit market…
… but are facing growing scrutiny and regulatory intervention
Inattentive credit users are more likely to use payday loans
Figure 28: Types of credit on which money is owed, by consumer typologies, April 2013
More than a quarter owe money on three or more types of credit
Figure 29: Number of different types of credit on which money is owed, April 2013
Figure 30: Types of credit on which money is owed, by number of types of credit on which money is owed, April 2013
Multi-credit users are more likely to spend money without worrying
Figure 31: Agreement with attitudes towards borrowing money and debt, by number of different types of credit on which money is owed, April 2013
LEVEL OF OUTSTANDING UNSECURED CREDIT
Key points
Unsecured debt balances – some movement at the margins
Figure 32: Level of outstanding unsecured debt, 2011-13
Most unsecured credit borrowers are managing their debts
Figure 33: Current financial position by the level of outstanding unsecured debt, April 2013
Unsecured debts are higher among mortgage holders
Higher borrowers are more likely to see use of credit as acceptable
Figure 34: Agreement with attitudes towards borrowing money and debt, by level of outstanding unsecured debt, April 2013
CHANGE IN PERSONAL DEBT LEVELS
Key points
Nearly two fifths have increased debts over the last three years
Figure 35: Change in debt levels over the last three years, April 2013
Who has taken on debt?
And who has reduced their debt burden?
Reducing debt and improving financial well-being
Figure 36: Change in debt levels over the last three years, by financial situation compared to a year ago, April 2013
Impetus to reduce debts across the spectrum of credit balances
Figure 37: Change in debt levels over the last three years, by level of outstanding unsecured debt, April 2013
LEVEL OF COMFORT WITH PERSONAL DEBT
Key points
Half of all credit holders are comfortable with their debts
Figure 38: Level of comfort with level of debt, April 2013
Anxiety increases among those with unsecured debts of more than £3,000
Figure 39: Level of comfort with level of debt, by level of outstanding unsecured debt, April 2013
Escalating debts also lead to increased discomfort
Figure 40: Level of comfort with level of debt, by change in debt levels over the last three years, April 2013
Multi-credit holders are more likely to have concerns over debts
Figure 41: Level of comfort with level of debt, by number of different types of credit on which money is owed, April 2013
Sophisticated credit users are the most comfortable with debts
Figure 42: Level of comfort with level of debt, by consumer segmentation, April 2013
APPETITE FOR BORROWING/USING CREDIT
Key points
A fifth expect to use credit over the next 12 months
Figure 43: Expected use of credit over the next 12 months, April 2013
Under-35s are much more likely to be planning to borrow money in the next year
Figure 44: People who expect to use credit in the next 12 months, by age group, April 2013
Most expected borrowers already have unsecured debts
Figure 45: Types of credit on which money is owed, by expected use of credit over the next 12 months, April 2013
Expected borrowers have average levels of unsecured debt
Figure 46: Level of outstanding unsecured debt, by expected use of credit over the next 12 months, April 2013
Figure 47: Expected use of credit over the next 12 months, by number of different types of credit on which money is owed, April 2013
Sophisticated financial planners are the most open to borrowing in the next year
Figure 48: Expected use of credit over the next 12 months, by target groups, April 2013
USE OF AND INTEREST IN MONEY MANAGEMENT SERVICES
Key points
Accessing credit file tops list of money management activities undertaken…
Figure 49: Consumer usage of selected money management and budgeting tools, April 2013
… but credit providers face a challenge to gain repeat business
Figure 50: Proportion of users of selected money management and budgeting tools who would and wouldn’t use the service in future, April 2013
Online budgeting tools are growing in popularity
50% are interested in using money management tools from their bank
Figure 51: Consumer interest in using money management and budgeting tools, April 2013
Figure 52: Interest in using online money management/budgeting tools, by age group, April 2013
Keeping young adults engaged is the challenge for providers of budgeting tools
Role of face-to-face debt advice should not be overlooked
APPENDIX – CONSUMER SEGMENTATION – ATTITUDES TOWARDS DEBT AND CREDIT
Figure 53: Agreement with the statements ‘I don’t like the idea of being in debt’ and ‘It is irresponsible to rely on credit’, by demographics, April 2013
Figure 54: Agreement with the statements ‘Borrowing money should be a last resort’ and ‘It is better to save up for something rather than rely on credit’, by demographics, April 2013
Figure 55: Agreement with the statements ‘Borrowing money can be a useful way to protect savings’ and ‘I tend to spend money now and worry about it later’, by demographics, April 2013
Figure 56: Agreement with the statements ‘I like to keep a close eye on my finances’ and ‘Using credit is acceptable on some occasions’, by demographics, April 2013
Figure 57: Agreement with the statements ‘It makes sense to use credit cards to pay for large purchases’ and ‘Credit can offer more flexibility when managing household finances’, by demographics, April 2013
Consumer Segmentation
Figure 58: Consumer Segmentation, by demographics, April 2013
Figure 59: Expected use of credit over the next 12 months, by consumer segmentation, April 2013
APPENDIX – CREDIT OWNERSHIP
Figure 60: Types of credit on which money is owed, by demographics, April 2013
Figure 61: Types of credit on which money is owed, by demographics, April 2013 (continued)
Figure 62: Types of credit on which money is owed, by demographics, April 2013 (continued)
Figure 63: Number of different types of credit on which money is owed, by demographics, April 2013
APPENDIX – LEVEL OF OUTSTANDING UNSECURED CREDIT
Figure 64: Level of outstanding unsecured debt, by demographics, April 2013
Figure 65: Level of outstanding unsecured debt, by demographics, April 2013 (continued)
Figure 66: Types of credit on which money is owed, by level of outstanding unsecured debt, April 2013
Figure 67: Level of outstanding unsecured debt, by number of different types of credit on which money is owed, April 2013
APPENDIX – CHANGE IN PERSONAL DEBT LEVELS
Figure 68: Change in debt levels over the last three years, by demographics, April 2013
Figure 69: Types of credit on which money is owed, by change in debt levels over the last three years, April 2013
Figure 70: Change in debt levels over the last three years, by number of different types of credit on which money is owed, April 2013
APPENDIX – LEVEL OF COMFORT WITH PERSONAL DEBT
Figure 71: Level of comfort with level of debt, by demographics, April 2013
Figure 72: Level of comfort with level of debt, by demographics, April 2013 (continued)
Figure 73: Types of credit on which money is owed, by level of comfort with level of debt, April 2013
Figure 74: Types of credit on which money is owed, by level of comfort with level of debt, April 2013 (continued)
APPENDIX – APPETITE FOR BORROWING/USING CREDIT
Figure 75: Expected use of credit over the next 12 months, by demographics, April 2013
APPENDIX – USE OF AND INTEREST IN MONEY MANAGEMENT SERVICES
Figure 76: Usage of and appetite for money management and budgeting tools, April 2013
Figure 77: Usage of and appetite for money management and budgeting tools, by level of comfort with level of debt, April 2013
Figure 78: Usage of and appetite for regular access to your credit report/file, by demographics, April 2013
Figure 79: Usage of and appetite for one-off access to your credit report/file, by demographics, April 2013
Figure 80: Usage of and appetite for online money management/budgeting tool (from your bank), by demographics, April 2013
Figure 81: Usage of and appetite for online money management/budgeting tool (not from your bank), by demographics, April 2013
Figure 82: Usage of and appetite for advice from a debt counselling service, by demographics, April 2013
Figure 83: Usage of and appetite for face-to-face advice about money management and budgeting from your bank/building society, by demographics, April 2013
Figure 84: Usage of and appetite for mobile apps for money management/budgeting, by demographics, April 2013
Figure 85: Usage of and appetite for money management classes or workshops, by demographics, April 2013
Figure 86: Usage of and appetite for peer-to-peer advice such as online discussion boards, by demographics, April 2013

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