Young generation faces high-debt, low-asset futureCCCS research reveals bleak future for many
03 November 2011
Younger Britons are getting into more debt earlier in life and will be unlikely to be able to acquire assets in the same way their parents and grandparents did, according to new research.
The Financial Inclusion Centre report, commissioned by debt charity Consumer Credit Counselling Service (CCCS), also reveals the current extent of financial vulnerability among younger households:
- More than a million (1,039,000) households in the 18-39 age group are identified as already struggling to cope.
- A further 893,000 households in that age group are 'at risk' of falling into difficulty.
Higher debts among younger consumers
While debt levels currently peak around the time that people turn 40, the report found that this situation is now changing, with consumers building up large levels of debt at a much younger age. Almost three quarters of those aged 18 to 39 now have unsecured debts, compared to around 60% of the 40-54 age group.
Younger households are more likely to use credit to make ends meet, with 19% of the 18 to 24 age group saying they are very or fairly likely to need to borrow in the next three months.
Younger households are also more likely to be behind with their debts, with those in the 25 to 39 age group more than twice as likely to be in arrears or insolvency as those in the 55+ group (15% compared with 7%).
In the 10 years to 2007, the average house price grew from around 2.3 times to nearly 5.5 times gross earnings, leaving younger homebuyers with extra mortgage debt as a result of a significant transfer of wealth to those further up the housing ladder.
Rising prices and squeezed incomes mean that the ‘bank of mum and dad’ has become the only option for an increasing number of first time buyers, with the proportion under the age of 30 requiring financial assistance rising from 38% in 2005 to 84% in 2010.
Higher student debts and lengthier student loan repayments will, according to the report, further reduce available income, making it harder for younger households to save, invest or acquire other assets. Total student debt is expected to grow to £153 billion in real terms by 2031, with loan repayments amounting to nearly £7 billion a year.
Many are financially vulnerable
Commenting on the report, Which? debt expert Martyn Saville said: 'There has been a lot in the news recently about pensioner poverty and consumers having to choose between food and fuel. This new report shows just how widely the current economic squeeze is being felt, with younger generations facing their own difficulties. The bad news for the younger generation is that economic recovery may not bring with it an improvement in their own longer-term situation.
'If you're struggling with your finances, there are places that can help. Organisations like the CCCS, National Debtline and Citizens Advice all offer free and impartial advice.'
- First-time buyer help from parents - how to help your kids onto the property ladder
- How to deal with debt - how to get free, independent advice if you're struggling with your finances
- Ways to save on heating - our tips to cut your fuel bills and stay warm this winter