An overview of consumer credit lending and household debt trends in the UK including mortgages, credit cards, other lending, household incomes and debt interest payments.

1. Consumer Credit Trends 1990-2013
Verum Research, May 2014
INFORMATION PACK

2. Presentation flow
1. Research and methodology
2. Gross consumer lending 1990-2013
4. Gross and net lending by segment 2013
6. Credit outstanding 1990-2013
3. Net consumer lending 1990-2013
7. Debt and house prices 1990-2013
9. Debt write-offs and insolvencies 1990-2013
8. Household gross interest payments 1990-2013
5. Mortgage lending trends 2000-2013
11. Research conclusions
10. Lower household discretionary incomes

3. Consumer Credit Trends brings together all the principal data on consumer credit in the UK into
a single report. The data is analysed to provide historical trends over the period 1990-2013 and
is updated every six moths.
The research
The methodology
The methodology employed in producing this research is a detailed analysis of consumer
spending and consumer borrowing trends based on data from the Office for National Statistics
(ONS) and from the Bank of England from which conclusions are drawn.
The data analysed includes an historical analysis of gross and net consumer lending, credit
outstanding and repayments, debt write-offs and insolvencies, interest payments and interest
rates, mortgage market and house purchase trends, mortgage arrears and possessions, the
credit card market and overall household debt. Data on consumer debt excludes student loans
data. All the data analysed are based on current prices.
Foreword by Professor James Fitchett, University of Leicester
A foreword to this report has been written by Professor James Fitchett, University of Leicester
School of Management. James Fitchett is Professor of Marketing and Consumer Research:
“The main problem facing the UK economy is therefore now a problem concerning consumer
spending and debt. As these data show in considerable detail, the prospect of even slightly
higher marginal lending rates could have a catastrophic effect on the economy.”

4. Gross Lending
Source: Bank of England/Verum Financial Research
Gross annual lending comprising consumer credit (credit cards, overdrafts, personal loans etc)
and loans secured on dwellings (mortgages), reached a peak in 2007 at £563.4 billion of which
£200.6 billion was consumer credit and £362.8 billion was mortgage lending. After falling back
sharply in 2008 and 2009, gross lending began to rise again in 2010 and continued to increase
through to 2013.
Gross annual lending, 1990-2013 (£m)
0
100,000
200,000
300,000
400,000
500,000
600,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Grosslending,£million
Consumer credit Mortgages

5. Net Lending
Source: Bank of England/Verum Financial Research
Net lending, comprising gross lending less repayments, rose from £17.8 billion in 1992 to a
peak of £123.6 billion in 2004. Net lending then stagnated as interest rates rose between 2004
and 2007, before falling back sharply to £48.3 billion in 2008 and to £5.3 billion in 2010. Net
consumer credit lending was actually negative in 2009 and 2010 as borrowers repaid more
than they borrowed, particularly in relation to consumer credit.
Net annual lending, 1990-2013 (£m)
-20,000
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000 1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Netlending,£million
Consumer credit Mortgages

6. Mortgages accounted for the
highest proportion of gross and
net consumer credit in 2013 at
49% and 57% respectively with
£176.4 billion gross and £11.3
billion net being borrowed for
mortgage finance.
Gross & Net Lending by Segment 2013
Source: Bank of England/Verum Financial Research
Credit cards accounted for 38%
of gross consumer credit in
2013 and 15% of net credit with
£138.6 billion gross and £2.9
billion net being borrowed on
credit cards.
Mortgages
£11,290
57%
Credit cards
2,946
15%
Other
£5,556
28%
Mortgages
176,399
49%
Credit cards
138,633
38%
Other
47,311
13%

7. The number of all mortgages
approved peaked much earlier than
the value of mortgages in 2003 at 4.1
million. The volume of mortgages
approved fell in 2004 and 2005, which
coincided with a rise in interest rates.
Mortgage volume fell sharply in 2008
by 40% and reached a low of 1.2
million in 2012 but then rose by
nearly 12% to 1.3 million in 2013.
Mortgage Lending Trends
Source: Bank of England/Verum Financial Research
The value of all mortgages approved
reached a peak in 2007 at £360
billion before falling to £216 billion
in 2008 and reached a low of £135
billion in 2010. The value of
mortgages approved has since risen
steadily to reach £180 billion in
2013.
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Valueofloansapproved£m
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Numberofloansapproved

8. Credit Outstanding
Source: Bank of England/Office for National Statistics/Verum Financial Research
Total outstanding household debt
has risen by 314% between 1990
and 2013 from £348 billion to
£1,437 billion. Outstanding debt
fell from a previous peak of
£1,431 billion in 2008 to £1,408
billion in 2011 but has since
begun to rise again.
Credit outstanding & household income, 1990-2013
Mortgage debt or credit secured
on property now accounts for
89% of the total credit
outstanding owed by
households. Credit cards
accounted for 4% of total credit
outstanding and other lending
accounting for 7%.
Credit outstanding by segment, 1990-2013
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Total credit outstanding Households' gross disposable income
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Credit cards Other credit Mortgages

9. Debt & House Prices
The principal cause of the rising level of debt owed by households in the UK has been the rise
in house prices relative to incomes. Over the period 1990-2013, total outstanding household
debt rose by 314% while average house prices rose by 319% and mortgage debt as a
proportion of total household debt has increased from 85% in 1990 to 89% in 2013.
Credit outstanding and house prices, 1990-2013
Source: Bank of England/Office for National Statistics/Verum Financial Research
-
50,000
100,000
150,000
200,000
250,000
300,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Houseprices(£)
Outstandingdebt(£m)
Credit outstanding House prices

10. Debt Write-offs & Insolvencies
Source: Bank of England/The Insolvency Service/Verum Financial Research
Write-offs of mortgage debt by
banks reached £984 million in 2009
while write-offs of credit cards and
other unsecured lending reached
£9.1 billion in 2009. Write-offs of
both mortgage debt and unsecured
debt have since fallen sharply with
mortgage write-offs having fallen to
£664 million in 2013 while write-
offs of unsecured debt have fallen
to £2.9 billion.
Personal insolvencies rose steadily
from a low of 24,441 in 1997 to a
peak in 2010 of 135,045.
Insolvencies rose more sharply from
2004 following an increase in
interest rates. The increase in
insolvencies in 2009 was due to the
introduction of Debt Relief Orders
(DROs) under the Tribunals, Courts
and Enforcement Act 2007. Total
insolvencies fell to 122 million in
2013.
0
2,000
4,000
6,000
8,000
10,000
12,000
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Write-offs of total consumer lending by banks and building societies (£m)
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Insolvencies

11. As household debt has grown,
household gross interest payments
have risen and reached a peak in
2009 before base rates were cut to
0.5% (Note – base rates reached
14.6% in 1990 but interest payments
were much higher in 2009 despite
interest rates peaking at just 5.5% in
2007).
Gross Interest Payments Risk
Source: Office for National Statistics/Verum Financial Research
Although household gross interest
payments have fallen as a proportion
of household income, they have not
declined significantly because
household debt has grown faster
then household incomes.
Consequently, high-debt households
are at risk if interest rates rise.
0
20,000
40,000
60,000
80,000
100,000
120,000
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Gross interest payments (£m)
0%
2%
4%
6%
8%
10%
12%
14%
16%
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Gross interest payments as % of household disposable income

12. Household discretionary incomes
have grown at a slower rate than
total gross household income since
1990 because of a rising level of non-
discretionary or essential living costs.
Essential living costs fell steadily after
the 1990 recession but have
remained stubbornly high since the
2009 recession.
Lower Household Discretionary Incomes
Source: Office for National Statistics/Verum Financial Research calculations
Lower levels of discretionary income
give households ‘less green’ to take
on or afford additional credit,
especially in a variable interest rate
environment where more than half
of all mortgaged households are on
variable rate mortgages.
40%
45%
50%
55%
60%
65%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
%GrossDisposableIncome
Household non-discretionary spending % of gross disposable income
35%
37%
39%
41%
43%
45%
47%
49%
51%
53%
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
%GrossDisposableIncome
Discretionary income as % of disposable income
Non-discretionary spending
Discretionary income

13. UK Consumer Credit Trends – Some Conclusions
• Increasing debt is linked to rising house prices
• Households are burdened by high non-discretionary spending
• Household discretionary incomes are shrinking
• High household debts are constraining economic growth
• Debt is used by consumers to facilitate both investment and consumption
• High mortgage debt has implications for corporations in other credit-sensitive sectors
• There is a requirement to wean the population off debt
• There is a need for less debt and more pension investing
• Household insolvency rates have risen significantly since the 1990 recession
• Interest rates of 3% would tip economy into recession due to high debt servicing costs
The following points summarise very briefly some of the conclusions from the research:

14. Consumer Credit Trends Report
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Total report page length – 112 pages

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