Table of Contents
- Issues in the MarketKey issues
- Abbreviations
- Market in Brief
- Economic conditions stifle market
- Secured borrowing is a real alternative to a loan
- Gross lending on unsecured loans to 20% in 2008
- Figure 1: Estimated gross lending for unsecured personal loans, 2003-08
- Lloyds TSB is the market leader
- Adspend on personal loans has declined markedly
- Figure 2: Personal loan advertising expenditure, by sector,
2005/06-2007/08
- One in twelve people has an unsecured personal loan
- Figure 3: Outstanding consumer credit ownership, Sep' 2008
- People are cutting back in the wake of economic downturn
- Internal Market Environment
- Key points
- A more cautious approach towards lending
- The new Banking Code
- Revenue from PPI sales is likely to be hit
- Liquidity issues are still a problem...
- ...although the government has intervened
- Lenders have increased rates on personal loans...
- Figure 4: Average personal loan rates, Oct 2007 and Oct 2008
- ...and some have exited the market altogether
- Bad debts are likely to rise...
- Figure 5: Individual insolvencies in England and Wales (seasonally
adjusted), Q1 2002-Q3 2008
- ...causing providers to tighten their lending criteria
- Broader Market Environment
- Key points
- Economic conditions are worsening...
- ...and some families are starting to struggle
- House prices continue to fall
- Figure 6: Average UK house prices, Jan 2007-Sep 2008
- The Bank of England has slashed interest rates
- Figure 7: Base rate, Jan 2000-Jul 2008
- Unemployment concerns are starting to mount
- An ageing population is not good news for lenders
- Figure 8: UK population, by lifestage, 2003-13
- Increasing regulation and consumer education
- Competitive Context
- Key points
- Overdraft lending has remained flat since 2005
- Figure 9: Overdraft advances to individuals and individual trusts (MBBG
only), 2002-07
- Borrowing on credit cards may start to rise
- Figure 10: Total gross lending and net amounts outstanding on credit
card lending (seasonally adjusted), Jan 2003-Sep 2008
- Housing equity withdrawal has declined sharply
- Figure 11: Housing equity withdrawal (seasonally adjusted), Q1 2003-Q2
2008
- Secured loans and further advances are other alternatives
- Figure 12: Size of the secured lending market, by sector and gross
advances, 2003-07
- Strengths and Weaknesses in the Market
- Market strengths
- A relatively simple product
- Margins are good at present
- The dawn of an era of more responsible lending
- Safer than secured borrowing
- Market weaknesses
- Stricter lending criteria
- Potential loss of revenue from PPI sales
- Consumers are tightening their belts
- Bad debts are likely to rise
- Market Size and Forecast
- Key points
- Total unsecured lending has declined since 2004
- Figure 13: Total unsecured gross lending (monthly data, seasonally
adjusted), Jan 2003-Sep 2008
- Non-credit card lending has decreased sharply since mid-2007
- Figure 14: Total gross lending and net amounts outstanding of non-credit
card consumer credit lending* (monthly data, seasonally adjusted), Jan
2003-Sep 2008
- Lending on unsecured personal loans is declining...
- Figure 15: Gross lending on structured personal loans (monthly data,
seasonally adjusted) (MBBG only), 2007 vs 2008
- ...with total gross lending expected to fall sharply in 2008
- Figure 16: Estimated gross lending for unsecured personal loans, 2003-08
- Market forecast
- Figure 17: Forecast of gross lending on unsecured personal loans, 2003-13
- Factors used in the forecast
- Market Share
- Key points
- Lloyds TSB is the market leader
- Figure 18: Unsecured personal loan market share, by provider, August
2007 and September 2008
- The ' big five' dominate the market
- Figure 19: Unsecured personal loan market share, by type of provider,
September 2008
- Companies and Products
- Key points
- High street banks don' t offer the best rates
- Figure 20: Top ten rates on unsecured personal loans, by value of loan,
November 2008
- PPI and other fees supplement interest income
- A win-lose business model
- An extremely diverse marketplace
- Recent developments in the market
- Brand Communication and Promotion
- Key points
- Personal loan adspend has declined markedly...
- Figure 21: Financial services advertising expenditure, by sub-category,
2005/06-2007/08
- ...in both the secured and unsecured sectors
- Figure 22: Personal loan advertising expenditure, by sector,
2005/06-2007/08
- Lloyds TSB has the highest advertising expenditure
- Figure 23: Top 20 advertisers of unsecured personal loans,
2005/06-2007/08
- Direct mail is the most popular advertising media
- Figure 24: Unsecured personal loan advertising expenditure, by media
type, 2007/08
- Channels to Market
- Key points
- People are likely to source a loan through their bank
- Figure 36: Likelihood of potential customers to source a loan through
their current account provider, Sep' 2008
- A quarter of internet shoppers have bought a financial product online...
- Figure 37: Tendency of internet shoppers to purchase vrious products
online in the last three months, by product category, Oct 2003-Jul 2008
- ...but only one in ten internet users has bought a loan online recently
- Figure 38: Websites actually purchased from in the last three months
(financial products only), Oct 2003-Jul 2008
- The Consumer -- Product Ownership
- Key points
- One in twelve people have an unsecured personal loan
- Figure 39: Outstanding consumer credit ownership, September 2008
- BMRB data suggest one in five people has a loan
- Figure 40: Type of loan held, June 2008
- Men are more likely to have an unsecured loan
- Figure 41: Outstanding consumer credit ownership, by type of credit
owned (excluding student loans), by gender, age, socio-economic group,
marital status and age of children in household, September 2008
- Ds and C1s more likely to have a loan...
- ...as are those with children
- Two fifths of loan owners have it with their main bank
- Figure 42: Proportion of product holders who hold financial products
with their main current account provider, April 2008
- The most common amount borrowed is £2,000-5,999Figure 43: Value of loan,
June 2008
- Car purchase is the most common loan purpose
- Figure 44: Purpose of loan, June 2008
- The Consumer -- Borrowing Trends
- Key points
- Half of people don' t think they' ll need a loan in the near future
- Figure 53: Consumer borrowing trends, September 2008
- Men are more in touch with the personal loans market
- Figure 54: Consumer borrowing trends, by gender, age, socio-economic
group, lifestage, newspaper readership and household size, September 2008
- ABs are more rate-sensitive
- Large households are a good target group
- Evidence of the debt cycle...
- Figure 55: Consumer borrowing trends, by types of consumer credit owned,
September 2008
- ...as unsecured loan holders are more stretched
- People that are cutting back are more rate-sensitive...
- Figure 56: Consumer borrowing trends, by attitudes towards borrowing,
September 2008
- ...and are generally more confident in their financial position
- People who recognise the impact of the crunch seem more savvy
- Rate tarts are not in the market for a loan
- Figure 57: Spread of attitudes towards borrowing, September 2008
- Low-risk borrowers are savvy... but also unprofitable
- Appendix -- Market Size and Forecast
- Figure 63: Total gross unsecured consumer lending split, by product
category, 2002-08
- Appendix -- The Consumer: Product Ownership
- Figure 64: Outstanding consumer credit ownership, by type of credit
owned, by demographic sub-group, September 2008, (Table 1 of 2)
- Figure 65: Outstanding consumer credit ownership, by type of credit
owned, by demographic sub-group, September 2008 (Table 2 of 2)
- Appendix -- The Consumer: Borrowing Trends
- Figure 67: Consumer borrowing trends, by demographic sub-group,
September 2008, (Table 1 of 2)
- Figure 68: Consumer borrowing trends, by demographic sub-group,
September 2008, (Table 2 of 2)
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