Personal Finance Pressures and Credit Behaviour

YouGov research commissioned by Callcredit Information Group has revealed some worrying attitudes towards credit as British adults feel their personal finances are squeezed.

Impacts on personal finances in 2010

The research showed that many British adults felt their personal finances had been significantly impacted in 2010, by a number of different factors.

• 35% of respondents said increases in domestic bills had a sudden and significant impact upon their personal finances in the last year
•  18% said the same of an increase in travel costs
• 9% 35-44 year olds said that losing their job in the last year had significantly impacted finances, more than double the average (4%)

Capacity to spend

The results suggest that a worrying proportion of British adults may be approaching the limits of their affordability. This is impacting individuals and may have also have a knock on effect on the recovery of retail spending.  Young adults (25-34) were revealed to be in the most precarious position:

• 40% of 25-34 year olds have applied for credit in last year (double the average)
• 10% of 25-34 year olds have knowingly overestimated their income on credit application
• 7% of 25-34 year olds have applied for credit knowing they might not be able to keep up repayments

However, the worrying results weren't restricted to young adults:

• 32% of respondents have two or more current accounts with overdraft facility, nearly a third have access to two or more accounts with overdraft and 10% of 18-24 have access to four or more.
• 12% of adults said they would be unable to pay their mortgage if their monthly income reduced by up to £300
• 5% of 45-54 year olds say they couldn't keep up repayments if monthly income dropped by up to £100
• 7% of adults never envisage being debt free

Financial worries for the current year

Perhaps most alarmingly, Brits are very worried about a range of factors that they think will significantly impact their finances in 2011.

• 53% of respondents expect the VAT increase to have a significant impact on their finances in 2011
• 59% expect rising food prices to have a significant impact on finances in 2011
• 55% expect rising travel fares or fuel costs to have a significant impact
• 55% of public sector workers expect a salary freeze or reduction to have a significant impact, almost double the average (28%).

With the research revealing that many adults felt the strain of rising costs and job losses in 2010, 2011 looks to be causing even more concern and this could have a considerable effect on lenders.

"These figures are extremely alarming" said Graham Lund, Managing Director of Callcredit. "It seems that a significant proportion of British people are struggling to balance their finances, with some people prepared to apply for credit knowing that they are not able to repay or exaggerating income on an application just to get credit. This shows just how important it is for lenders to have a complete view of customer finances to understand their levels of affordability."

Graham Lund continues, "It's very important, for both lenders and consumers, that financial services organisations are using the right tools to recognise when individuals are on the verge of over-indebtedness or are unable to afford credit - including having sight of accounts held by other lenders. This holistic view of affordability will help to support both responsible lending and responsible borrowing and is essential in stabilising consumer and business economies.

Research information
All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2031 adults. Fieldwork was undertaken between 11th - 13th January 2011. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).