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Inequalities in the use and burden of consumer credit

Evidence type: Insight i


Policymakers and the press have increasingly raised concerns about rising levels of UK household debt, with fears that this could have enough of an impact to cause another recession. Borrowing levels have grown substantially in recent decades, with the total stock of secured debt (chiefly mortgages) rising from £363 billion in 1997 to £1.4 trillion in 2018. Over the same period consumer debt (mostly unsecured) rose from £58 billion to £203 billion. However, while household debt levels remain high in absolute terms, when compared against total household incomes they are considerably below levels reached during the financial crisis. Reductions in the Bank of England’s base rate have also helped to drive down the cost of credit.

The study

This 2020 report argues that policymakers need to focus on the distribution of consumer debt as well as the absolute levels, and specifically the extent to which low-to-middle income households are increasingly exposed to it.

This report is intended as a briefing note and as such has little detail on the methodology employed. However, a large number of resources from a variety of sources are used to corroborate the narrative. The sources used include:

  • Bank of England / NMG household survey data, which is an annual survey that asks people questions about their income and spending. This resource is used throughout the report.
  • Office for National Statistics Wealth and Assets Survey, which is a biennial longitudinal survey that measures the financial wellbeing of households and individuals in terms of their assets, savings, debt, and planning for retirement.
  • The CPIH, defined as the Consumer Prices Index including owner occupiers housing costs.
  • Citizens Advice reports and data.
  • Reports from the media, including the Financial Times and the Guardian.

Key findings

  • Over the past ten years there has been a rise of ten percentage points in the proportion of lower-income households using some form of consumer credit (excluding student loans), almost equaling the credit use of those at the top of the income distribution.
    • For example, there has been a 13 percentage point rise in the bottom income quintile of those using a credit card, compared to a four point rise in the middle quintile and a two point rise among those at the top of the income distribution.
  • The burden of debt remains significantly higher for those households at the bottom of the income distribution.
    • For example, typical consumer debt repayments, relative to monthly pre-tax income, remain nearly three times as high for households in the lower income quintile against those on the highest incomes.
  • Evidence shows that lower-income households with outstanding consumer debt tend to experience more financial stress than their counterparts both in the bottom income quintile who do not have outstanding consumer debt and those in the higher income quintiles who do.
  • The proportion of low-income households using some form of consumer debt rose by nine percentage points between 2006-08 and 2016-19 – a far steeper rise than the one point rise among high-income households
  • The rising use of consumer debt has been concentrated in products with high interest rates that have not got cheaper over the past decade (unlike mortgage debt, which low-income households are less likely to have taken on).
  • Credit card use among low-income households grew by 13 percentage points between 2006-08 and 2016-19.
  • The use of overdrafts grew by four percentage points between 2006-08 and 2016-19.
  • More than half (53 per cent) of low-income households with consumer debt reported difficulties in meeting their accommodation costs in 2016-19, an increase from one-in-three households in 2006-2008.
  • Less than a third (32 per cent) of lower-income households with consumer debt felt they had enough money set aside for emergencies/unexpected events, compared to 42 per cent of those in the middle income quintile with consumer debt and two-thirds (65 per cent) of those in the top income quintile.

Points to consider

  • Methodological strengths/weaknesses: Sources are used to demonstrate that policymakers should ‘turn their attention to the spread of consumer debt across the population’, as well as concentrating on the absolute levels of consumer debt.
  • While methodological details are scarce, much of the analysis presented is from secondary resources that are robust and reliable (for example the Office for National Statistics).
  • Generalisability/ transferability: This report is of significant interest to politicians, policymakers and other stakeholders who are interested in assessing the levels and distribution of consumer credit within the UK.
  • Relevance: The findings are situated in a UK context, though some of the learnings may be transferrable to countries with similar financial regulatory environments.

Key info

Year of publication
United Kingdom
Contact information

Jubair Ahmed and Kathleen Henahan


Resolution Foundation