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Money Matters: Attitudes towards using credit are changing – Feb 2016

Here is the 6th instalment of our Money Matters report, a study which looks at consumers’ attitudes and concerns relating to the overall economic outlook for the coming year.


2015 showed considerable growth in consumers’ financial confidence. The fact that this year’s results are fairly similar indicates that although consumer optimism has not continued to improve, it has significantly and permanently changed for the better since 2012/13.


Consumers are still often cautious about their financial prospects, despite a generally improved economic environment. Around a third (34%) of people are more worried about their finances now than they were a year ago which was similar to last year’s result.


Under-35s are significantly more likely to be more worried about their current finances compared to this time last year, though they are also the most optimistic group with regards to salary expectations in the next 12 months. This is one explanation for why under-35s are also the most likely group to expect to increase their non-essential spending in the coming year.


UK overall debt total has declined but younger households continue to ramp up their debt-to-income ratio. This group has to take on bigger mortgages to buy homes which have been subject to major price inflation in recent years and have suffered six years of below inflation pay rises, leading many to use credit cards to fund their lifestyles.


The Resolution Foundation, an independent thinktank, has estimated that almost 1.6m households are forced to spend more than half of their disposable income on mortgage payments or rent and more than 1m of those with mortgages will be at risk of defaulting and losing their properties in the wake of even a small rise in interest rates.


Thankfully, the bank of England governor Mark Carney, said ‘now is not yet the time to raise interest rates’ and traders pushed their expectations for the next Bank Rate rise all the way back to September 2017.


Attitudes towards using credit are changing however. Just over a fifth (21%) of credit customers expect to increase the amount of debt that they owe in the next 12 months. This is a significant drop from 2015, when around three in ten (29%) expected to increase the amount they owed.


Overall, people seem reasonably confident in their ability to ride out the potential threats to their personal finances without having to turn to credit.

For a detailed overview of consumer confidence & spending, our full Money Matters report is available free on our website.