New research echoes FCA’s concerns for the indebted youth
There is a pronounced build-up of indebtedness amongst the younger age group and more people have to use credit to make ends meet.
An alternative lender’s new report on short-term borrowing has unearthed growing indebtedness among British youngsters – echoing the financial regulator’s fears.
Non-prime lender Elevate Credit has created a report with the Social Market Foundation (SMF) that analyses the short-term borrowing landscape in Britain.
The report found that short-term borrowers tend to be young – nearly half (44 percent) of all borrowers surveyed were aged between 18 and 34.
The report, surveying 1,000 borrowers, has been published two years after the introduction of the Financial Conduct Authority’s (FCA) payday lending price cap.
It also found the main reason for the use of short-term credit is for essential expenditure, such as paying household bills and necessary supermarket spends.
This report echoes a point highlighted by the FCA’s chief executive, Andrew Bailey, who this week told the BBC that young people are having to borrow for basic living costs.
He said there is a pronounced build-up of indebtedness amongst the younger age group and the high price of renting and lack of income growth means more people have to use credit to make ends meet.
Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “Andrew Bailey is absolutely right to highlight the growing debt burden on young people.
“While this trend may not yet be considered a risk, on its own, to the economy as a whole, debt problems at such an early age can have a huge impact on the individuals involved.”
Mike O’Connor, chief executive of StepChange Debt Charity, added: “Our most recent statistics chime with warnings that record numbers of people are getting into debt at an earlier age, with young people relying on credit to cover essential costs.
“The proportion of younger clients seeking our debt advice has grown by 10 percent in the last five years and now almost two thirds of clients are under 40.”