UK Consumer Credit in 2025: A Market Rebounding with Caution and Growth Opportunity

Two-thirds of UK consumers now feel financially comfortable, and optimism is on the rise.¹ Yet, one in three still report financial strain — highlighting the two-speed reality defining today’s market.¹ While average unsecured debt per borrower rose 5% in the past year, but debt-to-income ratios have improved significantly since 2019.²

Credit is being used for more than just emergencies. While many consumers use it for holidays and entertainment, a growing number rely on it to cover essentials like groceries and commuting — particularly those under financial pressure.

Buy Now, Pay Later (BNPL) reached 11 million users in 2024.¹ While credit cards remain the top short-term credit choice (used by 45% of consumers), BNPL continues to gain ground — particularly among younger adults.¹ Although, with Financial Conduct Authority (FCA) regulation for BNPL expected by 2026, the competitive landscape is poised for change.³

Around 60% of consumers now shop around for credit, and 33% would switch providers for better rates.¹ With aggregators simplifying comparisons, loyalty is fading — and lenders must compete on both value and experience.

With the FCA’s Consumer Duty, now fully in effect, expectations around fairness and transparency are rising. Reforms to the Consumer Credit Act and forthcoming BNPL FCA oversight signal a move toward more consumer outcome-focused regulation.

Recent mergers — such as Nationwide–Virgin Money and Barclays–Tesco Bank — have further concentrated market share among the top five lenders. At the same time, digital banks and FinTechs are challenging incumbents with agile, customer-centric offerings.

Financial literacy is improving. TransUnion already supports over 24.9 million consumers with credit monitoring tools.⁴  Tools such as credit score simulators and personalised alerts are empowering consumers to take more control of their financial health and helping them to make more informed decisions — while helping lenders build loyalty.