Carefree Brits lead 'spend now pay later' lifestyle
Latest research from MINTEL finds the nation gripped by a borrowing culture, with the vast majority of those in debt showing no concern about the amount of money they owe.
Today, almost half of British adults (44%) or around 21 million consumers are currently in debt, owing money on a variety of credit and loan products (not including mortgages).
While a quarter (25%) of borrowers have debts of less than £500, some 8% of debtors currently owe between £10,001 and £20,000, and a further 5% have borrowed more than £20,000. This means that today, around one in eight (13%) borrowers or 2.5 million adults now have total debts in excess of £10,000. But what is perhaps even more worrying is that as many as 70% of those who owe as much as this are not concerned about their level of debt and some one in four (24%) might actually consider borrowing more.
Although a minority of just one in 20 (5%) borrowers are 'very worried about the amount of debt that they currently hold', and one in ten (10%) are 'quite worried', overall MINTEL has found the vast majority of consumers in debt appear to be remarkably relaxed about their current situation. Indeed, 85% of debtors feel that their financial situation is well under control. What is more, almost a quarter (24%) of all debtors (or 5 million consumers) say that not only is their current level of borrowing under control but that they might borrow more at some point in the future. This would appear to suggest that consumer demand for credit may not yet have abated.
"While many people in debt may have the means to continue meeting their repayments, the high levels of debt and lack of worry does clearly represent a cause for concern. Although the research certainly shows that an impending debt crisis is not inevitable, a large minority of households are extremely vulnerable to any deterioration in the prevailing economic conditions. Indeed, a significant weakening in the labour market or a sustained bout of monetary tightening could clearly have a devastating impact on the finances of many consumers, and lead to a sharp rise in the level of bad debts. While this may not currently be the most likely outcome, there is clearly the possibility that such a ‘doomsday’ scenario could yet unfold," comments Paul Davies, senior finance analyst at MINTEL.
"The increasingly widespread availability of credit has meant that many consumers have found that they no longer have to save up in order to finance major purchases, but instead can simply fund their current spending plans through a variety of credit arrangements. In certain situations, credit has effectively replaced the need to save up for purchases," adds Paul Davies.
Credit cards are the most common form of borrowing with almost three in ten (29%) holding an outstanding balance on one of these products. Furthermore, some 6% of adults also have an outstanding balance on a store card.
"This high incidence of credit card and store card debt partly reflects the ease with which consumers can borrow through these accounts. These products have acted to blur the distinction between spending and borrowing and have helped to create a ‘spend now, pay later’ culture. The credit card industry's promotion of 0% purchases and balance transfers for fixed time periods will also clearly have encouraged some consumers to borrow money via this route," comments Paul Davies.
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