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Debt Management: Winners and Losers - UKPublished by: Mintel International Group Ltd. Published: Dec. 1, 2005 - 119 Pages Table of ContentsIntroduction and Abbreviations Aims of the report Global information and research Consumer research ACORN Abbreviations Executive Summary Consumer borrowing has reached record levels in the last few years As a result, consumer debt has now passed the £1 trillion mark An increasing proportion of consumers appear to be struggling with debt Around 21 million consumers owe money on credit or loan products Credit cards are the most common form of borrowing Debtors typically owe relatively small amounts of money… …but more than one in eight borrowers do owe more than £10,000 The vast majority of debtors feel their situation is well under control… …but just over a million adults are very worried about their debt situation A quarter of all consumers like the idea of combining all their debts More than half of all adults expect to borrow money in the next two years The Level of Consumer Debt In total, UK consumers borrowed more than £500 billion in 2004 Figure 1: Gross and net lending to individuals, annual data, 1994-2004 The growth in lending has stalled during the last 12 months… Figure 2: Gross and net lending to individuals, quarterly data, Q4 2003-Q3 2005 …but consumer debt continues to rise to unprecedented levels Figure 3: Amounts outstanding for secured lending and consumer credit, 1995-2005* Mortgage equity withdrawal has been a key driver of the credit boom Figure 4: Mortgage equity withdrawal by individuals, quarterly data, Q1 1995-Q2 2005 An increasing proportion of consumers appear to be struggling with debt Housing repossessions and arrears cases have also started to rise Personal bankruptcies have also risen to record levels Figure 5: Number of insolvencies in England and Wales (not seasonally adjusted), 1997-2005 Market Factors Favourable economic conditions have underpinned the credit boom High employment levels have boosted the demand for borrowing Figure 6: Summary of the UK labour market, 1995-2005 Growth in consumer expenditure has underpinned the credit binge Figure 7: Personal disposable income, consumer expenditure and the savings ratio, 2000-10 Low interest rates have made it affordable for consumers to borrow more Figure 8: Bank of England base rate, end of quarter, 1975-2005 But debtors are now vulnerable to relatively small rate rises Higher tax burden could also cause problems for the heavily indebted Housing market boom has been a key driver of consumer borrowing Figure 9: Real house prices in the UK, 1970-2005* A correction in property values is likely to constrain future borrowing Competition within the consumer credit market has increased dramatically This has reduced cost and increased availability of lending products The loans and credit industry has been accused of ‘irresponsible’ lending Student loans have increased the debt burden on the younger generation Providers and Participants in the Debt Management Sector The mainstream lenders are key players in the debt management sector Subdued borrowing and rising debts may hit mainstream lenders Debt consolidation companies are increasingly coming to the fore Further opportunities are likely to arise for debt consolidation companies Debt management companies are also likely to have an increasing role The government is taking steps to tackle problems of over-indebtedness The Chancellor has allocated £45 million to boost free debt advice services Citizens Advice Bureau staff provide a key service for many consumers Other charities also provide free debt advice and counselling services Advertising and Promotion Advertising helps to make financial services tangible The importance of advertising rises when competition intensifies Lenders invested over £500 million in advertising in the last 12 months Figure 10: Total advertising expenditure on lending products, by product area, October 2004-September 2005 Direct mail accounts for around half of all advertising expenditure Figure 11: Total advertising expenditure on lending products, by media type, October 2004-September 2005 Lenders have also invested significant sums in television campaigns The press is also a commonly utilised advertising channel Advertising has been blamed for encouraging people to get into debt The Consumer and Debt Management - Current Situation Around 21 million consumers owe money on credit or loan products Figure 12: Proportion of consumers who owe money on credit and loan products, by type of product, October 2005 Almost three in ten people have an outstanding credit card balance Overdrafts and personal loans are also popular ways of borrowing money Student loans have also become a necessity for a minority of adults More than one in six debtors have borrowed via three or more products Figure 13: Proportion of consumers who owe money on different combinations of credit and loan products, October 2005 The 25-44-year-olds are the most likely to be in debt Figure 14: Proportion of consumers who owe money on credit and loan products, by gender, age and socio-economic group, October 2005 Type of credit or loan products used varies across consumer segments Figure 15: Proportion of consumers who owe money on the six most common credit and loan products, by gender, age and socio-economic group, October 2005 Full-time workers are more inclined to use credit and loan products Figure 16: Proportion of consumers who owe money on the six most common credit and loan products, by lifestage, working status and income, October 2005 Scottish consumers display a strong appetite for credit products Figure 17: Proportion of consumers who owe money on the six most common credit and loan products, by TV region, ACORN group and technology usage, October 2005 One in ten Morrisons customers owe money on a personal loan Figure 18: Proportion of consumers who owe money on the six most common credit and loan products, by newspaper readership, commercial TV viewing and supermarket usage, October 2005 A quarter of all borrowers have debts of less than £500… Figure 19: Average amount owed on credit and loan products, October 2005 …but more than one in eight borrowers owe more than £10,000 Almost a quarter of 35-44-year-olds have debts in excess of £5,000 Figure 20: Average amount owed on credit and loan products, by gender, age and socio-economic group, October 2005 Three in ten ABC1 pre-/no family consumers owe more than £5,000 Figure 21: Average amount owed on credit and loan products, by lifestage, socio-economic/lifestage and income, October 2005 Full-time workers tend to have taken on relatively large debts Figure 22: Average amount owed on credit and loan products, by working status, TV region and ACORN group, October 2005 People who are heavily in debt tend to hold a range of lending products Figure 23: Proportion of consumers who owe money on credit and loan products, by average amount owed, October 2005 The vast majority of debtors feel their situation is well under control Figure 24: Attitude towards current debt situation, October 2005 But just over a million adults are very worried about their debt situation One in eight people with debts exceeding £10,000 are very worried Figure 25: Attitude towards current debt situation, by average amount owed on credit and loan products, October 2005 A significant minority of young people are concerned about their debts Figure 26: Attitude towards current debt situation, by gender, age and socio-economic group, October 2005 ABs are the least likely to be anxious about their level of borrowing Almost a fifth at the family lifestage expect to borrow more Figure 27: Attitude towards current debt situation, by lifestage, working status and income, October 2005 More than one in ten Southerners are worried about their debt situation Figure 28: Attitude towards current debt situation, by TV region, ACORN group and newspaper readership, October 2005 The Consumer and Debt Management - Attitudes towards Loans, Credit and Debt More than four in ten consumers rarely or never use credit Figure 29: Agreement with statements about borrowing, by gender, October 2005 The research suggests there could be 1.5 million ‘new’ loan customers Most consumers can manage their finances, but some do need help One in 12 people regret having taken out a loan or credit agreement A fifth of the consumer base feel that early redemption penalties are unfair The heavily indebted are the most likely to need help with their finances Figure 30: Agreement with statements about borrowing, by average amount owed on credit and loan products, October 2005 The 25-44s are most likely to have regrets over loans or credit agreements Figure 31: Agreement with statements about borrowing, by age group, October 2005 One in seven C1s are hoping to pay off their loans early Figure 32: Agreement with statements about borrowing, by socio-economic group, October 2005 Southerners are most likely to have had savings plans disrupted by debt Figure 33: Agreement with statements about borrowing, by TV region, October 2005 The research found strong support for teaching youngsters about debt Figure 34: Consumer attitudes towards debt, October 2005 A large majority of consumers also believe it is too easy to get into debt Around nine in ten consumers want greater clarity from lenders A quarter of all consumers like the idea of combining all their debts Almost six in ten people who owe over £10,000 would combine their debts Figure 35: Agreement with statements about debt, by average amount owed on credit and loan products, October 2005 Four in ten Ds don’t read terms and conditions on credit agreements Figure 36: ‘Don't tend to read terms and conditions on a credit or loan agreement’, by gender, age and socio-economic group, October 2005 A large minority at the family lifestage also ignore terms and conditions Figure 37: ‘Don't tend to read terms and conditions on a credit or loan agreement’, by lifestage, TV region and newspaper readership, October 2005 Younger consumers are more likely to favour combining their debts Figure 38: ‘Combining my debts into one loan repayment appeals to me’, by gender, age and socio-economic group, October 2005 Debt consolidation appeals more to consumers in northern Britain Figure 39: ‘Combining my debts into one loan repayment appeals to me’, by lifestage, TV region and newspaper readership, October 2005 A quarter of 25-34-year-olds would consider remortgaging to pay off debt Figure 40: ‘Would consider remortgaging in order to pay off debts’, by gender, age and socio-economic group, October 2005 Almost a fifth of tabloid readers would release equity to pay off debts Figure 41: ‘Would consider remortgaging in order to pay off debts’, by lifestage, TV region and newspaper readership, October 2005 The Consumer and Debt Management - Future Intentions and Product ‘Winners’ Almost four in ten consumers expect to keep their borrowing in check Figure 42: Agreement with statements about debt and borrowing, by gender, October 2005 Almost one in 12 adults are worried they won’t meet their commitments More than one in ten consumers see credit as an alternative to saving up Over a quarter of the heavily indebted worry about future commitments Figure 43: Agreement with statements about debt and borrowing, by average amount owed on credit and loan products, October 2005 One in eight 45-64-year-olds would be lost without their credit cards Figure 44: Agreement with statements about debt and borrowing, by age group, October 2005 Nearly half of all AB consumers expect to keep their borrowing in check Figure 45: Agreement with statements about debt and borrowing, by socio-economic group, October 2005 The consumer base can be grouped according to their attitude towards debt Figure 46: Debt typologies, by gender, age and socio-economic group, October 2005 More than half of all adults expect to borrow money in the next two years Figure 47: Proportion of consumers who might borrow money in the next two years, by type of product, October 2005 Just over a quarter of consumers are likely to borrow on their credit cards Overdrafts are set to remain a common way of borrowing money One in 12 consumers expect to take out a car loan in the next two years Mortgages will continue to provide people with a key source of finance The 25-44s and ABs are most likely to borrow over the next two years Figure 48: Proportion of consumers who might borrow money in the next two years, by gender, age and socio-economic group, October 2005 People earning over £50,000 are keen to boost their spending power Figure 49: Proportion of consumers who might borrow money in the next two years, by lifestage, working status and income, October 2005 Nearly one in ten Scottish consumers expect to arrange a personal loan Figure 50: Proportion of consumers who might borrow money in the next two years, by TV region, ACORN group and newspaper readership, October 2005 One in 12 Dealers in Debt expect to take out a consolidation loan Figure 51: Proportion of consumers who might borrow money in the next two years, by debt typologies, October 2005 The Future Benign economic conditions still provide a relatively positive backdrop Most consumers do currently feel they can handle their debt situation Indeed, almost a quarter of all debtors look set to borrow more But a small minority would appear to be having problems with their debts This will clearly create opportunities for debt consolidation companies Any economic shocks could result in more severe problems with debt Forecast How much further? Non-housing debt - onwards but slower Figure 52: Forecast of gross lending not secured on dwellings, 2005-10 Rebound is short-lived Becoming more competitive But plenty of consumers The economy is key in functional terms… ...and psychologically AbstractMintel's Financial Intelligence series is currently divided into two sectors:Product Series The Product Series consists of four highly specialised sectors: (Money Transmission / Insurance / Life & Pensions / Investments & Savings) These complementary sectors combine to give you ultimate flexibility, whether you want an industry-focused base of information, or a complete picture covering a wide range of consumer-based markets. Within each sector, every report provides a thorough analysis of the market, looking at: Market characteristics: profile of the consumer / penetration / trends / major suppliers / product profile/s / potential markets / European data Environmental analysis: social / legal / economic / political / technological Original consumer research (UK): a mix of demographic data and attitudinal statements Marketing Concept Series The Marketing Concept series focuses on 4 key areas of the financial services industry each year. Designed to provide an in-depth analysis upon which to base future strategic decisions, these reports are published quarterly and cover: Concept characteristics: review of major principles of concept / trends / overseas data/case study / review of major suppliers activities/ strategies/tactics Environmental analysis: social / legal / economic / political / technological Original consumer research: segmentation study No other financial research company can provide you with this much coverage. With constant industry monitoring, you can be assured that each Financial Intelligence report is not only topical and up-to-date, but also allows Mintel to present you with analyses of any new and emerging sectors. Get Full Details About This Report >> |
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