Consumers' Attitudes Towards Debt

Consumers' Attitudes Towards Debt - UK

Product Type: Market Research Report
Published by: Mintel International Group Ltd.
Published: July 2009
Product Code: R560-3985

Description

Since Mintel published the 2008 edition of this report, the credit market has changed beyond recognition. The days of cheap, easily available credit are well and truly over, at least for the foreseeable future. Falling base rates haven’t stopped credit card companies pushing up their APRs, while cheap mortgage deals are only available to those with a sizeable deposit.

It’s not just the supply of credit that has tailed off. Consumers are showing real signs of reassessing their financial priorities, cutting back on spending and looking to pay down debts. The savings ratio is still low by historical standards - but is far higher than was true at the peak of the debt boom.

This report examines the key economic trends that drive both demand and supply for credit, and the way in which consumers are reacting to the current slowdown. It tracks changes in attitude and confidence as the credit crunch turned into full-blown recession, and looks at which consumer groups have been hardest hit.

More general attitudes towards money and spending are examined, highlighting who is saving for a rainy day and how basic money management skills can affect the feeling of financial wellbeing. The consumer groups most likely to be cutting back on spending in favour of building up their savings are identified - crucial information not only for financial services providers, but also for any business reliant on discretionary consumer expenditure.

Key issues

The economy is in recession, with all the associated pressures this places on consumer spending and, in turn, borrowing.
Arrears are rising rapidly as people struggle to make ends meet - but most are still managing their finances fairly well.
The increase in consumer credit has perhaps been overplayed by the media, but outstanding debts are still at a record high.
There are signs that consumers are starting to recognise the advantages of the traditional adage “Never a borrower nor a lender be”.
Excessive debt is concentrated among a relatively small proportion of the adult population - for most, borrowing remains fairly manageable.
There is an extremely close link between an inability to budget and a tendency to get into financial difficulties.

Table of Contents

Issues in the Market: Key issues; Abbreviations
Market in Brief: New lending tails off - finally; Despite the slowdown, most are still making ends meet…; …but the burden of debt is starting to be felt; More debts, more problems; Most manage their spending pretty well; Impulsive? Or virtuous?; Cutting back on spending to cover the credit card bills; Housing equity withdrawal turns negative…; …while credit card lending remains steady
Household Debt in Context: Key points; Have we reached the summit of the debt mountain?; Outstanding balances start to shrink; Borrowing races ahead of PDI
Changing Economic Environment: Key points; The recession starts to hit home…; …and unemployment takes a turn for the worse; Mixed news on employment; Low base rates limit the damage…; …but only help a few
The Crunch Effect - Continued: Key points; The credit crunch continues to have a huge impact; Low interest rates moderate the remortgage issue…; …although rates on unsecured credit are increasing; A spirit of prudence returns?; Time to clear those debts…; …or forced to build them up again?; Not all have been affected; It’s not what you know, it’s who you know; A degree of optimism?; Availability of finance
The Over-Extended Consumer: Key points; Write-offs increase - but don’t soar; Repossessions - not as bad as initially feared?; Bankruptcies hit new levels; Changing attitudes towards bankruptcy?; Generation debt - advice charities feel the strain
The Mortgage Market: Key points; The mortgage market shuts down…; …and even shifts into reverse gear; Little faith in future price rises; Housing equity withdrawal turns negative; The end of the property piggy bank
Consumer Credit: Key points; Credit cards still mainly used as revolving credit…; …but personal loan balances continue to grow; Loans hit by cheap mortgage finance…; …and then the slowdown
The Consumer - Financial Situation: Key points; Most are still getting by…; …but how much slack is there in household budgets?; The less affluent are far less confident; An easy retirement?; Flying south for the winter
The Consumer - Credit Ownership: Key points; Most have some kind of outstanding credit…; …with a quarter holding multiple types; Credit - only a problem if you can’t control it?; Borrowers feel the pinch; A generational shift; Credit’s useful - as long as you don’t need it
The Consumer - Level of Unsecured Debt: Key points; One in ten owe have more than £10,000 in unsecured debt; Struggling at the margins; Borrowing their way into trouble; More strain on the family budget
The Consumer - Level of Secured Debt: Key points; High mortgages are the exception, not the norm; The cost of climbing the ladder
The Consumer - Borrowing, Saving and Managing Money: Key points; Paragons of financial virtue?; Reaping the rewards of responsible budgeting…; …and the financial implications of a lack of organisation; The ‘denial’ approach to managing debt; Mortgage holders - managing their responsibilities?; The polarisation of consumer credit; Experience, or a generational shift?; The student loan generation; Affluent enough to take a few risks?
The Consumer - Attitudes and Expectations: Key points; Time to cut back borrowing?; Credit rationing - only a problem for a minority; The view from the ivory tower; The stretched are concentrating on clearing debts; A third of mortgage holders are feeling the benefit; Reality hits for the over-extended?
The Consumer - Segmenting the Population: Key points; Most manage their finances with only the occasional glitch; Young and carefree; Is virtue its own reward?; Banks reducing options for the Impulsive?; Anything for an easy life; Dreaming of a return to traditional banking values
Appendix - The Consumer - Financial Situation
Appendix - The Consumer - Credit Ownership
Appendix - The Consumer - Level of Debt
Appendix - The Consumer - Borrowing, Saving and Managing Money
Appendix - The Consumer - Attitudes and Expectations
Appendix - The Consumer - Segmenting the Market
Appendix: Research Methodology

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