Money News

Younger Brits face bleak future of high debts and few assets

Thursday 03 November, 2011

By Martin Fagan

Brits under 40 burdened by debt will struggle to get on property ladder and save for retirement, says CCCS report

Younger Brits are getting into more debt earlier in life and are unlikely to acquire assets in the same way their parents and grandparents did, new research has shown.

The Debt and the Generations report, commissioned by national debt charity Consumer Credit Counselling Service (CCCS), 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.

While debt levels currently peak around the time that people turn 40, the report found this situation is now changing, with consumers building up large levels of debt at a much younger age. Almost three-quarters of people aged 18 to 39 now have unsecured debts, compared to around 60% of the 40-54 age group.

Rising levels of debt and increasing house prices have made it harder for young people to get a foot on the property ladder. In the 10 years to 2007, the average house price grew from 2.3 times to 5.5 times gross earnings, leaving younger homebuyers with extra mortgage debt. As a result, CCCS says there has been a significant transfer of wealth to those further up the housing ladder.

The CCCS says rising debt and housing costs have left nearly two million younger households vulnerable to financial difficulties.

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.

"The younger generations are facing a worrying future,” said CCCS chairman, Wilf Stevenson.

He added: “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."

CCCS says analysis of its data shows that, last year, one in three CCCS clients under 40 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 per cent.