Personal Loans

Market Assessment 2008 Fourth Edition May 2008

Publication Date	May 2008
Publisher	Key Note
Product Type	Report
Pages	186
ISBN Number	not applicable
Product Code	KEY00137

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Summary

The UK consumer credit market, along with other forms of borrowing, increased strongly in the early years of the 21st century. However, the growth rate has since fallen dramatically, with the ending of houseprice inflation, which is even likely to reverse during the economic slowdown in 2008.

While the total amount lent is still at historically high levels, personal loans are no longer as profitable as other forms of lending that carry higher interest rates or are secured against property. Some firms, such as London Scottish, have already left the market with heavy losses.

Banks remain dominant as lenders and their position is assured by their ability to command leading positions in all forms of lending. This diversifies their risk in a dynamic market and, if the market for personal loans diminishes, allows them to focus on credit cards or on secured lending. In 2008, credit cards also appear to have peaked in terms of use. The banks' focus on student loans and their participation in the provision of basic accounts indicates that they are interested in generating customer loyalty among groups to whom they do not already lend.

As a group, building societies have been weakened by the conversion to banks by all but one of the largest societies. However, they have been able to use their customerservice skills to maintain their position and to improve it within both personal and secured lending. Building societies gain in any circumstances where banks charge higher interest rates or where lenders are seen as taking unfair advantage through excessive fees. They also benefit after a financial crisis through their conservative funding policies.

Other specialist lenders principally providing hire purchase (HP), lease purchase or direct personal loans for large capital items such as cars are vulnerable, owing to the down turn in demand and the cost of funds.

Their position is linked to their market niche and to the continuing strong position of motor manufacturers in the retail motor sales market. Despite the deregulation of the retail motor trade and the separation of manufacturers from retailers, the convenience to retail customers of finance arranged through the motor retailer remains highly attractive. Finance companies that are supported by privateequity capital or by bank groups compete with other finance companies for business. However, competition in a market with slackening consumer demand and high funding costs is itself falling off: consumers needing a loan have to persuade a lender that they are a good risk.

Retailers continue to finance purchases by their customers mainly through branded and affinity creditcard arrangements through major banks and other finance sources. The Competition Commission's report on store cards led to regulatory innovations that will further reduce the importance of retailer credit, given the high interest rates that are usually charged for it.

Insurance companies have reduced their personallending activity and Ke

Content

Executive Summary
- 1. Introduction
Background
Definition
- 2. Strategic Overview
Economic Indicators
- Population
- Table 1: UK Resident Population Estimates by Sex (000), MidYears 20032007
- Gross Domestic Product
- Table 2: UK Gross Domestic Product at Current and
- Annual ChainLinked Prices (gm), 20032007
- Inflation
- Table 3: UK Rate of Inflation (%), 20032007
- Unemployment
- Table 4: Actual Number of Unemployed Persons in The UK (Million), 20032007
- Household Disposable Income
- Table 5: UK Household Disposable Income per Capita (g), 20032007
- Consumer Confidence
- Table 6: The Nationwide Consumer Confidence Index
- (%), February 2007February 2008
Market Dynamics and Segmentation
- Introduction
- Market Trends
- Table 7: Total UK Consumer Credit by Gross Lending
- by Sector (gm and Index 2003=100), 20032007
- Market Size
- Table 8: Total UK Consumer Credit by Amount Outstanding
- by Sector (gm and Index 2003=100), 20032007
- Contents Personal Loans
- Key Note Ltd 2008
Regulation
- The Consumer Credit Act 1974
- Protection under The Act
- Cancelling A Credit Agreement
- Default Notice
- Court Orders
- Unfair Agreements
- Suing The Seller or Credit Provider
- Written Information
- The Consumer Credit Act 2006
- Consumer Credit Act 2006 X Main Provisions
- Advertising Regulation and The Financial Services Authority
Distribution
Competitive Structure
- Debt
The Consumer
Market Forecasts
- 3. Banks
Background
Market Trends
- Table 9: UK Consumer Credit by Gross Lending by Banks
- (gm and Index 2003=100), 20032007
Market Size
- Table 10: UK Consumer Credit by Amount Outstanding with Banks
- (gm and Index 2003=100), 20032007
Market Share
- Table 11: UK Banks Individual Group Balances
- by Loans and Advances to Customers (gbn), 2007
Distribution
The Consumer
- Loan Repayment Fees
- Overdrafts
4. Building Societies
Background
Market Trends
- Table 12: UK Consumer Credit by Gross Lending by Building Societies
- (gm and Index 2003=100), 20032007
Market Size
- Table 13: UK Consumer Credit by Amount Outstanding with Building Societies
- (gm and Index 2003=100), 20032007
Market Share
- Table 14: The Top Ten Building Societies in The UK
- by Assets (gm), 31st December 2007
Distribution
The Consumer
- 5. Other Consumer Credit Lenders
Background
Market Trends
- Table 15: UK Consumer Credit by Gross Lending by Other Consumer
- Credit Lenders (gm and Index 2003=100), 20032007
Market Size
- Table 16: UK Consumer Credit by Amount Outstanding with Other
- Consumer Credit Lenders (gm and Index 2003=100), 20032007
Market Share
Distribution
The Consumer
- Motor Finance
- The Cost of Credit
- Motor Advertising
- Consumer Dynamics
- 6. Retailers
Background
Market Trends
Market Size
Store Cards
- Contents Personal Loans
- Key Note Ltd 2008
- 7. Insurance Companies and Other Lenders
Insurance Companies
- Background
- Market Trends
- Market Size
Other Lenders
- Supermarkets
- Consumer Dynamics
- The Post Office
- Credit Unions
- Advertising
- Consumer Dynamics
- 8. Personal Loans
Background
Consumer Credit
- Credit Scores
Unsecured Lending
- Market Trends
- Table 17: 12Month Growth Rate for Unsecured Lending
- to Individuals (%), 31st December 20032007
- Advertising
- Table 18: Main Media Advertising Expenditure on Unsecured
- Personal Loans (g000), Year Ending December 2007
- Suppliers
- PaymentProtection Insurance
Online Personal Loans
- Comparison Websites
The Consumer
- Comparing Lenders Offers on A Website
- Borrowing from An InternetBased Lender
- Taking out PaymentProtection Insurance
Home Credit
- The Competition Commissions Investigation
- Remedies to Be Implemented by November 2008
- Market Size
- Market Share
- Pricing X Apr and Total Charge for Credit
9. Secured Lending
Background
Market Trends
- Table 19: UK Loans Secured on Dwellings by Net Advances
- (gm and Index 2003=100), 20032007
Market Size
- Table 20: UK Loans Secured on Dwellings by Amount Outstanding
- (gm and Index 2003=100), 20032007
Advertising
- Intermediaries
- Table 21: Main Media Advertising Expenditure on Secured Personal Loans
- (g000), Year Ending December 2007
Suppliers
The Consumer
- Taking out Secured Loans
- Difficulties Getting A Loan Due to Low Income
- Difficulties Getting A Loan Due to Poor Credit Record
- 10. Credit Cards
Background
Market Trends
- Table 22: UK Consumer Credit on Credit Cards by Gross Lending
- (gm and Index 2003=100), 20032007
Market Size
- Table 23: UK Consumer Credit on Credit Cards by Amount Outstanding
- (gm and Index 2003=100), 20032007
Advertising
- Table 24: Main Media Advertising Expenditure on Credit Cards
- and Store Cards (g000), Year Ending December 2007
The Consumer
- CreditCard Borrowing
- Contents Personal Loans
- Key Note Ltd 2008
- 11. Debt
Overindebtedness
Bankruptcy and Insolvency
- Table 25: Individual Insolvencies in England and Wales
- (Number and Index 2003=100), 20032007
Advertising
- Table 26: Main Media Advertising Expenditure on Debt Management Services
- (g000), Year Ending December 2007
Suppliers
Government Action
- Loans Debt
- National Strategy for Financial Capability
- Impairment Charges
The Consumer
- The Ease of Getting A Loan
- Saving to Avoid Debt
- Loan Repayment Concerns
- Borrowing from Multiple Lenders
- 12. An International Perspective
Introduction
- The Euro Area Bank Lending Survey January 2008
- Table 27: Changes in Credit Standards as Applied to The Approval
- of Loans to Households (%), October 2007January 2008
- Approvals
- Conditions and Terms
Demand for Loans
- 13. Pest Analysis
Political Factors
Economic Factors
Social Factors
Technological Factors

14. Consumer Dynamics

Overview

Table 28: Summary of Results (% of Respondents), 2006 and 2008

Debt and Taking out Loans

I Think IT Is Too Easy to Get A Loan Nowadays
I save up in Advance to Avoid Debt
I Intend Paying off My Personal Borrowing Early
Table 29: Attitudes towards Debt (% of Respondents), 2008
I Think Interest Rates Should Be Capped
I Take out PaymentProtection Insurance on My Personal Loans
I Prefer to Borrow Using My Home as Security
Table 30: Attitudes towards Capping Interest Rates, Taking out
PaymentProtection Insurance and Secured Lending
(% of Respondents), 2008
I Dont Mind Having Loans from Several Lenders
I Worry about Repaying My Personal Loan
I Intend Taking out A Personal Loan in The next Year
Table 31: Attitudes towards Loans (% of Respondents), 2008

Choosing A Lender

I Choose A Lender Because of Its Reputation
I Compare Lenders Offers on A Website before Choosing One
I Am Happy to Borrow Based on DirectMail Advertising
Table 32: Attitudes towards Choosing A Lender (% of Respondents), 2008

Sources of Borrowing

I Am Happy to Borrow on My Credit Card
I Am Happy to Borrow from A Supermarket
I Am Happy to Borrow from The Retailers Own Lender
Table 33: Attitudes towards Borrowing from Credit Cards, Supermarkets
and The Retailers Own Lender (% of Respondents), 2008
I Am Happy to Borrow from An InternetBased Lender
I Am Happy to Borrow from A TelephoneBased Lender
I Am Happy to Borrow from A Credit Union
Table 34: Attitudes towards Borrowing from InternetBased and
TelephoneBased Lenders, and Credit Unions
(% of Respondents), 2008

Difficulties in Getting A Loan

I Have Difficulty Getting A Loan Because of My Poor Credit Record
I Have Difficulty Getting A Loan Because I Have A Low Income
Table 35: Difficulties in Getting A Loan (% of Respondents), 2008
Contents Personal Loans
Key Note Ltd 2008
15. Company Profiles

Alliance & Leicester Plc

Corporate Strategy
New Product and Brand Developments
Distribution
Advertising
Profitability
Table 36: Financial Results for Alliance & Leicester Plc
(g000, Number, % and g), Years Ending 31st December 20052007
Future Company Developments

Barclays Plc

Corporate Strategy
New Product and Brand Development
Distribution
Advertising
Profitability
Table 37: Financial Results for Barclays Plc (g000, Number, % and g),
Years Ending 31st December 20052007
Future Company Developments

Cattles Plc

Corporate Strategy
Distribution
Advertising
Profitability
Table 38: Financial Results for Cattles Plc (g000, Number, % and g),
Years Ending 31st December 20052007
Future Company Developments

Hbos Plc

Corporate Strategy
New Product and Brand Development
Distribution
Advertising
Profitability
Table 39: Financial Results for Hbos Plc (g000, Number, % and g),
Years Ending 31st December 20052007
Future Company Developments

Hsbc Bank Plc

Corporate Strategy
New Product and Brand Development
Distribution
Advertising
Profitability

Table 40: Financial Results for Hsbc Bank Plc (g000, Number, % and g),

Years Ending 31st December 20042006
Future Company Developments

Lloyds Tsb Group Plc

Corporate Strategy
New Product and Brand Development
Distribution
Advertising
Profitability
Table 41: Financial Results for Lloyds Tsb Group Plc
(g000, Number, % and g), Years Ending 31st December 20052007
Future Company Developments

London Scottish Bank Plc

Corporate Strategy
New Product and Brand Development
Distribution
Advertising
Profitability
Table 42: Financial Results for London Scottish Bank Plc
(g000, Number, % and g), Years Ending 31st October 20052007
Future Company Developments

Provident Financial Plc

Corporate Strategy
New Product and Brand Development
Distribution
Advertising
Profitability
Table 43: Financial Results for Provident Financial Plc
(g000, Number, % and g), Years Ending 31st December 20052007
Future Company Developments

The Royal Bank of Scotland Group Plc

Corporate Strategy
New Product and Brand Development
Distribution
Advertising
Profitability
Table 44: Financial Results for The Royal Bank of Scotland Group Plc
(g000, Number, % and g), Years Ending 31st December 20052007
Future Company Developments
Contents Personal Loans
Key Note Ltd 2008
16. The Future

The Economy

Unemployment
Table 45: Forecast Actual Number of Unemployed Persons
in The UK (Million), 20082012
Inflation
Table 46: Forecast UK Rate of Inflation (%), 20082012
Population
Table 47: Forecast UK Resident Population by Sex (000), MidYears 20082012
Gross Domestic Product
Table 48: Forecast UK Growth in Gross Domestic Product in Real Terms (%), 20082012

Forecasts