Our Spending and Lending report delivers essential insights into
how UK
consumers are managing their finances right now.
In this edition we see the UK credit market showing measured stability. While savvy consumers are strategically optimising credit types, adaptation strategies for some may be near their limits. Consequently, early delinquency rates for some forms of new credit have reached a measurement period high.
The housing market has stabilised, with average home prices remaining around £300,000. Total residential mortgage debt reached a historic £1,568.8bn. While overall arrears are at their lowest since early 2023. A sharp spike in second charge mortgages suggests some households are leveraging home equity to consolidate debt.
Outstanding credit card debt now exceeds £80.9 billion, driven by sustained strategic usage and rewards. However, early delinquency is climbing among recent originations. Could new borrowers be hitting their affordability ceiling and demonstrating immediate repayment difficulties?
Unsecured loan originations have stabilised, with new lending balances averaging £8,000 and monthly repayments at an average £240. However, this market mirrors credit card distress. Volumes remain steady, but repayments are under pressure as early-stage delinquency climbs to a four-year high, signalling possible strained consumer affordability.
Defying wider trends, auto finance shows resilient volume and improving arrears, as households prioritise vehicle payments over unsecured credit. Electric vehicles comprise 27.3% of new registrations. However, the industry faces severe logistical and cost pressures regarding the FCA’s motor finance redress scheme.
Retail revolving credit is shifting toward larger purchases as smaller transactions migrate to BNPL. Handset loan arrears are rising among new borrowers. Concurrently, mainstream BNPL usage has reached 39%, alongside new FCA regulations effective July 15 that mandate affordability checks even for smaller purchases.
Affordability sits at the heart of every lending decision,
but the way consumers manage their
money has
fundamentally changed.
UK buyer behaviour reflects an increasingly sophisticated and deliberate financial strategy. Consumers are masterfully leveraging credit card rewards, interest-free Buy Now Pay Later options, and thriving re-commerce platforms to stretch their household budgets.
However, has this financial ingenuity hit an affordability ceiling? Stretched by prolonged cost-of-living pressures and high borrowing costs, many households are operating at their capacity.
Consequently, a single income shock could be enough to trigger financial stress and delinquency, underscoring a vital industry need for real-time, comprehensive affordability data to accurately gauge true consumer resilience.
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