Experian quarterly Affordability and credit update
Winter 2025/26
Data-driven insights into consumer trends and affordability
In our previous update, we considered the potential implications of the 26th November Autumn Budget for taxes, credit markets, and affordability. In the end, the Budget delivered few surprises, and markets remained stable. This calm response was unsurprising, given that most major measures had been well signposted, and the extended lead‑up since September created a sense of inevitability. Even so, the protracted process and several policy reversals, particularly around income tax, introduced uncertainty for businesses and households, contributing to stalled economic growth across Q2 and Q3 of 2025.
The Budget set out a tax‑led strategy to fund welfare reforms and stabilise public debt, signalling a preference for sustained revenue generation over deeper spending cuts. In practice, speculation and leaks in the run‑up had a greater impact on dampening confidence across markets than the measures announced on the day,
These tax increases largely took the form of extended ‘stealth’ measures, with the freeze on income tax thresholds now running until April 2031, having been pushed back from 2028. While designed to raise revenue through fiscal drag, the longer freeze will weigh on consumers, as three additional years of nominal earnings growth will erode the real gains in disposable income.
Further tax adjustments targeted personal wealth and investment income. These included a 2% rise in dividend taxation from April 2026, a cap on salary‑sacrifice pension contributions from April 2029, and a reduction in savings allowances. Alongside this, a new high‑value council tax levy for properties in England valued above £2m will take effect from April 2028. These measures fall predominantly on mid to high income households, while lower‑income groups benefit from a significant minimum wage uplift and expanded welfare support. However, the accompanying rise in employment costs will add further operational pressures for many UK businesses from April.
Overall, the Budget delivered incremental adjustments rather than sweeping reforms, creating modest fiscal headroom. Nevertheless, the measures will push the UK tax burden to record highs against a backdrop of rising unemployment and slowing wage growth. With the Autumn Budget now behind us, attention now turns to the Spring Statement and the next round of policy changes taking effect from April. Uncertainty has eased somewhat, but confidence remains fragile, while hiring activity remains subdued, with businesses limiting vacancies and backfilling.
Middle and higher earners face the greatest squeeze, while lower‑paid workers benefit from a substantial increase in the minimum wage. Even so, wage compression and job loss risks remain elevated in low‑pay sectors as firms absorb higher operating costs. Welfare recipients and pensioners fare comparatively better, supported by generous benefit uprating and the removal of the two‑child cap, which will materially improve household budgets for those affected.
Despite easing inflation and a softer monetary stance in 2026, UK households and businesses continue to navigate a difficult adjustment as structural cost pressures persist. The economic outlook remains challenging, with GDP growth forecast at 1.4% before slowing to 1% in 2026, well below the 2% average of the 2010s. For now, the UK credit market appears resilient, supported by strong financial inclusion and continued product innovation that should help consumers navigate future challenges responsibly.
At Experian, we are focusing on financial inclusion initiatives so more consumers can access credit when they need it most. For example, our ReFi solution (which is covered in detail later in this update), affordability data and capability and eligibility marketplace. We continue to invest in new data sources including open banking and pre-consented data to further support financial inclusion and decisioning.
“Despite recent economic volatility, the UK credit market has demonstrated notable resilience. Sustained lender confidence, alongside product innovation and enhanced eligibility journeys, is contributing to improved access and outcomes for consumers.”
David Kerry, Director of Data Insight.
Key findings
Scroll down to find out more about the latest affordability updates or click on a category below to jump to that section.
Credit
Demand for credit remains strong
Credit card applications surged and were up 10% YTD by the end of 2025, supported by expanded eligibility and product innovation. New lending volumes for cards rose 17% YTD, resulting in a record-breaking 10 million cards being issued in 2025 with 1 in 8 UK adults opening cards. Personal loans also increased 13% YTD and BNPL saw double-digit growth throughout 2025, while the Retail Finance market also showed some signs of life.
Mortgages
Positive momentum expected to continue
Mortgage demand ended the year up 9%, despite a brief dip in November. Mortgage lending grew 16% YTD compared to 2024. The Bank of England’s base cut to 3.75% and relaxed loan-to-income ratios are expected to drive further accessibility, particularly for first-time buyers.
Delinquency Risk
Performance remains aligned to risk
Despite expansion into higher-risk segments for cards and loans, delinquency emergence remains stable and aligned to risk. Rapid lending behaviour, however, poses a growing concern due to higher bad rates across all risk tiers.
Auto finance demand improved in the second half of 2025, ending the year up 1%. EV adoption is rising, with one in four December car sales being electric, but affordability challenges persist. Government incentives and regulatory targets are shaping the market, alongside upcoming EV tax changes
Unsecured debt now exceeds £83 billion, with 19 million consumers carrying balances. Debt consolidation loans are increasingly popular, accounting for 37% of loan eligibility searches. When executed correctly, consolidation significantly improves repayment outcomes. New solutions like Experian’s ReFi aim to reduce misuse, boost inclusion and support better consumer and lender outcomes when consolidating debts,
As a leading UK credit reference agency, we continue to invest in the latest data sources and enable access to rich data covering individuals and households across the UK, putting us in a unique position to analyse and interpret the impact of rising societal costs or financial market changes on consumers and lenders.
This update is based on real Experian-owned data, rather than outputs from analytical or predictive models. By avoiding interpretation, we can provide the most unbiased view of affordability, credit and consumer trends possible at a given point in time.
Real data
Not predictions or models
Credit
Unsecured lending remains strong
Eligibility journeys have expanded thanks to greater product availability, innovation, and risk appetite. Overall, Credit card pre-approval rates have risen by 4.5%, including particularly strong expansion for higher-risk consumers.
This has supported a 10% YTD increase in full credit card applications in 2025 met by a 17% rise in new lending, meaning lenders are meeting rising demand comfortably and confidently.
Credit card new lending volumes have risen 17% YTD in 2025
The performance at 3 months is significantly worse for rapid lending consumers
Credit card statement balances have also grown by £20 billion since January 2022, driven by more open accounts (up 4% YoY), more cards carrying a balance (up 7% YoY) and higher average balances (up 9% YoY). Improved offerings and attractive rewards appear to be fueling this growth rather than financial stress as 18% of these balances are associated with accounts opened in the last 12 months, up from 13% 3 years ago, suggesting the new cards being opened are actively being used. On top of this, delinquency remains stable and aligned to risk, meaning we are not seeing an emergence of stress, but we will continue to monitor.
Whilst good for financial inclusion, expanded eligibility has also enabled riskier behaviours such as ‘rapid lending,’ where individuals open three or more unsecured products within 30 days. This trend rose to 2.2% of all unsecured lending in August 2025 (retail finance, credit cards, personal loans), up from 1.7% in 2024. 1 in 3 of these types of transactions were from consumers opening three or more credit cards in a 30-day window.
By using this method some consumers are obtaining significantly higher combined limits, particularly those of the highest credit risk who are managing to open cards with combined limits 4.5x higher than their usual average. This is not just isolated to high-risk individuals though, as we see this type of behaviour across the risk spectrum and 40% of rapid lending consumers sit in the fair risk group. What we can say is that these individuals do tend to be younger (30% are under 30) and are very active in the eligibility market with almost half having done 10+ soft searches in the six months prior.
Some of these consumers will be capitalising on offers and rewards, others may be in financial distress, and some may be committing fraud with no intention of paying. Whatever the reason, we know that rapid lending accounts perform poorly, with high bad rates across all risk groups, and younger consumers faring worse than older ones.
Though a small share of new lending, the prevalence of this is increasing along with a worsening in performance, meaning this behaviour poses a potential risk and warrants close monitoring. Some lenders are also more impacted than others with new lending exposure ranging from 1% to 16%. This concern is not just isolated to card providers either as we typically see these consumers holding 10 other products across seven other lenders at the time of rapid lending, all of which are exposed, making this concern relevant to all lender types.
Credit card new lending volumes
Indexed to Jan 23
New business performance at 3 months
Indexed to Jul 21
Cards
Smiling customer pays with card at a store checkout counter.
Personal loans new lending volumes
Indexed to Jan 23
Loans
Loan eligibility has also widened, with some products offering rates below 6% and pre-approval rates increasing by 5.4%. Unlike cards, lower risk customers are seeing the largest increase in pre-approval rates, further solidifying loans in their typical demographic, however strides are being made to bolster inclusion with the higher risk groups also seeing uplift. As a result, new lending volumes are up 13% YTD and, while delinquency has edged up slightly as a result of the loosening of risk, it remains stable and predictable with no sign of breakout stress.
Personal loan new lending volumes have increased 13% YTD in 2025
Retail finance & BNPL
Demand for retail finance dipped slightly compared to 2024 as we entered the festive period and new lending volumes also remained sluggish at the end of 2025, down 18% on November of the previous year. Despite being down for the festive period, this market is still up overall with a YTD increase of 1.4%.
A market that is having no problems in terms of demand and meeting that demand is Buy Now Pay Later. This sector saw a massive influx of transactions over the festive period, with November seeing account volumes in the 10s of millions and 2025 seeing double digit growth YTD in both volume and spend.
“More than 10 million credit cards were opened in 2025, representing a record high and surpassing pre‑pandemic volumes. Although delinquency emergence has risen, it remains consistent with risk expectations, reflecting responsible lending practices. This will remain an area of ongoing monitoring.”
Craig Lupton, Head of Consumer Insight.
Mortgages
Mortgages continued strongly
Mortgage demand remained high at the end of 2025, up 9%, despite a slight stutter in demand in November due to pre-budget uncertainty. This in turn resulted in a slight dip in new lending volumes for November but 2025 as a whole is still up 16% YTD compared to 2024, which is very significant.
After the budget
With the budget proving less severe than feared and the Bank of England cutting the base rate to 3.75% in December, major lenders have already begun reducing rates with predictions of a price war (The Guardian). This is good news for consumers and combined with relaxed loan-to-income ratios, will make mortgages more accessible, particularly for first-time buyers. We therefore expect this market to continue to stay in growth as we move into 2026, further supported by the FCA, whose letter to the prime minister in December 2025 states their “intent to further overhaul mortgage rules so more people get on the housing ladder and can unlock housing wealth in later life” (FCA Letter to the Prime Minister).
Mortgage new lending volumes
Indexed to Jan 23
Mortgage new lending has risen by 16% YTD in 2025 despite the dip seen in November due to pre-budget uncertainty
Automotive
Auto finance going through a period of change
Demand for auto finance was slow in the first half of the year but began to pick up in the second, up 1% YTD. It was a strong September in terms of new lending volumes as a result of new registrations with a slight fallback in December but overall, up 2.5% YTD.
New car registrations
This comes amid the news that new car registrations in the UK reached over 2 million in 2025, the most seen since the pandemic, with almost one in four cars sold in December being fully electric. Despite the strong growth in EV sales there is still a long way to go until full, market-wide adoption is reached with the majority of those able to afford them being older, higher income consumers. To combat this, the Government has set targets on manufacturers to try to bolster EV adoption, with a headline target of 28% being set for 2025, something we fell short of despite the growth highlighted.
To avoid heavy fines for missing targets, manufacturers are said to be heavily discounting EVs. This is positive for the end consumer and helps to ease affordability challenges, however a major industry group has highlighted these targets are “unsustainable” and has expressed concerns around the even higher target imposed on the industry this year (33%) (BBC news).
The Government also introduced the EV Grant Scheme earlier in 2025 which provided up to £3,750 towards the price of a new EV, further easing affordability problems, however the plans to introduce a tax per mile on EV cars of 1.5p could reduce the gains made. This will not come into force until April 2028 and is set to be half the fuel duty rate paid by petrol car drivers (according to the OBR), however it could still impact adoption in the near-term.
Given the level of regulatory changes, coupled with the ongoing challenges regarding undisclosed commissions, the auto finance market is undergoing a period of significant and interesting change. Navigating this turbulence will be hard and require access to many historical agreements. We are trying to assist here by empowering auto lenders to meet the DCA redress requirement through comprehensive bureau data enabling a comprehensive view of the claimant universe, including historic contact records, and verification of customers.
Financial Inclusion
Strides made in financial inclusion, but challenges remain
Eligibility improvements have expanded access to credit, particularly for cards, where pre-approval rates rose most among higher-risk consumers.
This is largely driven by increased lender confidence, allowing risk strategies to be relaxed, supported by accurate and timely data. Product innovations and the increased popularity of eligibility journeys in general are also enabling more consumers to find the right financial offer for them.
Loans have also become more accessible, though they remain harder to obtain than cards due to their nature. Lenders cannot flex a credit limit and control their exposure as much in the loans space, and so must have greater confidence in the consumer before issuing large amounts of money.
Despite progress, gaps persist. We have modelled out the eligibility of the entire UK population and estimate that 5 million adults would see no card offers when performing an eligibility search and 15 million no loan offers.
With lenders in the cards market opening up more significantly, income, whilst still important, has a less significant impact on card eligibility compared to loans. Where low-income, high-risk consumers are ineligible 95% of the time for a loan, this is 65% for cards. Whilst not all of these consumers will be interested in opening credit at the moment, it is important to identify who would be excluded from the market should they need some support. Lenders must therefore leverage the opportunity to access more data and tools, such as open banking and pre-consented data, in order to gain a more precise view of consumer eligibility, ensuring consumers can access credit when needed.
Debt Restructuring
Rising debt levels resulting in consumer debt restructuring
Nearly 19 million consumers now hold unsecured debt, up by 1 million from last year, with total outstanding balances exceeding £83 billion, up by £5bn (unsecured debt is classed as any form of outstanding, interest-bearing debt across credit cards, retail finance, personal loans or buy now pay later accounts). With the opening up of unsecured markets discussed earlier and the increase we have seen around financial inclusion, coupled with the readoption of credit after a sustained period of restraint following the Covid and cost of living period, it is hardly surprising that more people are carrying more debt.
While not all borrowers are financially stressed, indeed carrying some debt and paying it off on time and in full each month is a positive, debt consolidation loans are gaining popularity as a way to simplify repayments and reduce costs. Debt consolidation provides access to a loan to enable multiple debts to be condensed into one loan. The consumer then makes a single monthly payment, usually at a lower overall rate, making repayment simpler and frequently lower or cheaper. “Consolidate Other Debts” was the top reason for loan eligibility searches in the most recent month, accounting for 37% of all queries.
Consumers who search for debt consolidation and subsequently take out a loan typically hold debt across multiple product types. Almost one in five have a mix of cards, loans and retail finance, while equal proportions hold debt across cards and retail finance or cards and personal loans (18%).
Contrary to common assumptions, these individuals are not exclusively high-risk borrowers and span the entire risk spectrum.
When done properly, debt consolidation delivers significant benefits for consumers. Five months after opening a consolidation loan, nearly half of identified consumers had reduced their outstanding debt by more than 25%. However, 31% had increased their debt during the same period and we can see that loan performance strongly correlates with debt reduction. Consumers who decreased their debt by more than 25% missed a payment at three months fewer than 1% of the time, far better than the almost 4% bad rate among those who increased or maintained their debt, outperforming the market average.
Clearly, when done right, debt consolidation is highly effective for both lenders and consumers. So why doesn’t it always work? The issue lies in the process: funds from a consolidation loan are paid into the consumer’s current account, leaving them to actively pay off existing debts. In some cases, this step doesn’t occur, and consumers spend the money elsewhere, effectively doubling their debt. To mitigate this risk, we are seeing lenders assess affordability by including both the new loan and existing commitments, requiring consumers to pass checks for double the amount they would actually pay if consolidation occurred, excluding many individuals from access.
The way in which this can be avoided is via Experian’s ReFi solution, supporting financial inclusion. This new approach enables the debt consolidation lender to pay off the consumer’s debts directly, removing the decision point and preventing misuse of funds. This, therefore, enables lenders to avoid double-counting commitments, improving affordability assessments and boosting financial inclusion.
This also benefits lenders, due to the low delinquency rates we observe when debt consolidation is done correctly and has the potential to deliver a substantial boost to the UK economy. Our ReFi solution could improve access to affordable credit and reduce interest burdens which we believe could enable UK households to spend an additional £15.1 billion a year and save an extra £2.1 billion per year. These increased contributions could mean over 100,000 jobs are created and the UK’s GDP could rise by ~0.4%.
Comparative new business performance
Indexed to the Personal Loans Market
The new business performance at 3 months on book is better than market for those that reduced their debt.
Authored by – Hannah Lloyd, Craig Lupton and David Kerry (Experian Data Insights)
“As unsecured lending has expanded, a greater number of consumers are holding higher levels of unsecured debt than previously observed. This does not, in itself, indicate heightened risk, but it does highlight the need for consumers to have timely access to suitable debt consolidation tools.”
Hannah Lloyd – Senior Data Analyst.
How can Experian help?
With our rich breadth and depth of data on consumers across the UK, we empower lenders to optimise new lending decisions and uncover growth opportunities with the right risk-aligned customers. What’s more, we can help organisations to understand each consumer’s individual financial circumstances, verifying their income, employment and expenditure to ensure products and services are right for them, today and in the future.
We believe data has the power to change lives.”
With better, more informed data we can support your business to grow and help you to drive better outcomes for your customers.
Find out more about:
Affordability insights
Reveal more about a consumer’s financial health.
Open banking insights
Helping lenders to verify and monitor financial wellbeing to take action quickly.
Digital Payroll
Reducing risk of payslip fraud by using verified income and employment verification data directly from source.
Credit risk
Enabling lenders to assess and monitor risk at the point of consumer engagement