Consumer credit utilisation set to hit £67bn as financial outcomes remain divided by gender
Equifax’s 2024 Financial Health Report reveals a rapid growth in the usage of credit and Buy Now Pay Later products. Total outstanding credit card debt has been steadily increasing since late-2021, rising by 9.7% in 2023 to reach £67.4bn by the year’s end. Additionally, the number of active cards with at least 90% utilisation has increased 10%, accompanied by a similar rise in cards exceeding their credit limits.
Alongside the concerning credit picture across the UK, there is evidence of consumers depleting previously accumulated savings. UK Finance data indicates eleven consecutive months of decline in personal deposit account funds throughout 2023.
Equifax analysis also highlights an increase in arrears levels in the mortgage and auto loans sectors. To combat rising costs, by November 2023, over 10% of originations featured mortgage loan terms exceeding 35 years, a substantial increase compared to pre-rate hike levels. Whilst extending loan terms may offer short-term cost reductions, it raises concerns about long-term financial implications.
Despite this, most consumers have upheld their repayment commitments across their various financial credit products. Encouragingly, Equifax’s study shows that 85% of indebted Brits feel confident in their ability to repay all their debts, with more than a quarter (26%) expressing extreme confidence.
As inflation stabilised over the past year, households have largely been able to adjust their finances, with no meaningful increase from last year in the number of consumers falling into arrears on their utility bills.
Challenges are exaggerated across the genders
A further challenge highlighted in Equifax’s Financial Health Report is a growing gender disparity in financial resilience. Despite overall confidence in repaying debt, there is a discrepancy in confidence levels between genders, with 91% of men feeling confident compared to 83% of women. Further to the gender gap concerns, the report reveals a 38% difference in savings between men and women by the age of 75.
This data implies that women may have been less able to take advantage of the increased interest rates we’re currently witnessing. Having a savings buffer is crucial for financial well-being as it enables consumers to manage their incomes and cope with inevitable downturns in life.
Paul Heywood, chief data and analytics officer at Equifax UK, comments: “Our 2024 Financial Health Report highlights the resilience of the nation over the last year. Many consumers have taken steps to reconfigure their finances and control costs in the face of rising inflation.
“However, the increased reliance on credit, alongside the increase in arrears levels in the mortgage and auto lending markets, casts light on the fact we aren’t out of the woods. Additionally, the financial gender gap highlights a growing concern of financial inequality across the UK.
“To align with consumer duty and deliver good consumer outcomes, we’re driving initiatives to prioritise consumer welfare, ensuring our processes and products deliver positive outcomes. We aim to enable more inclusive lending decisions for consumers with thin credit files while reducing over-indebtedness among those facing financial challenges.”
Matthew Greenwood, head of debt at the Centre for Social Justice, comments: “The data released by Equifax today reveal a string of issues that will confront Britain in the years ahead. Growing credit card utilisation and depleted savings show a Britain that struggled to keep up with the cost-of-living crisis and the increase in 35-year mortgages reveal a housing market that is fundamentally broken.
Higher interest rates have helped some savers but a sizeable gap in savings by gender suggests many women may have missed out. In an election year, both parties will be unable to ignore a swathe of the population that feel Britain just doesn’t work for them.”
