A society of higher debts, fewer assets

Nia Williams

November 2, 2011

This is highlighted by the fact that the ‘bank of mum and dad’ has become the only option for an increasing number of first time buyers wanting to buy property, with the proportion under the age of 30 requiring financial assistance rising from 38% in 2005 to 84% in 2010.

The Debt and the Generations report, commissioned by national debt charity Consumer Credit Counselling Service, predicts a bleak future for many people under the age of 40, as they struggle against higher built-up debts, reducing real incomes and increasing difficulties in saving for retirement.

The research, conducted for CCCS by the Financial Inclusion Centre think-tank, also reveals the current extent of financial vulnerability among younger households, identifying more than one million (1,039,000) households in the 18-39 age group as already struggling to cope and a further 893,000 “at risk” of falling into difficulty.

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.

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. The number of first-time buyers needing help to get on the housing ladder rose from 38% in 2005 to 84% in 2010.

Almost three-quarters of people 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 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 to 7%).

More than one million (1,039,000) households in the under 40 age group are ‘already in financial difficulty’, either three months behind with a debt repayment or subject to some form of debt action such as insolvency, with a further 893,000 “at risk” of falling behind.

Around one in three CCCS clients under 40 last year had no money left after covering basic living expenses each month. A £50 reduction in income would hit younger debtors particularly hard, with the proportion of clients with no budget surplus in the younger age bands rising to between 52 and 70%.

Commenting on the report, CCCS chairman Wilf Stevenson said: “The younger generations are facing a worrying future. Higher debts and fewer assets will put many in a precarious financial position, and these trends threaten to impact considerably on quality of life in later years.

“It is also essential they are protected from the aggressive practices of commercial debt management companies who will only add to their debt burden. Making sure that consumers know they can turn to debt charities such as CCCS for free advice and support must be a key part of our strategy in dealing with this problem.”


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