New generation of young people starting out with “stifling levels of debt”

24th September 2015


The number of young Britons struggling with debt has soared over the past year according to charity group Citizens Advice.

A report from the organisation entitled Unsecured and Insecured? highlighted that people aged 17-24 came to them with 102,296 debt issues in the past year, marking a 21% jump on the previous 12 months.

The charity said this increase comes against a backdrop of exploding unsecured borrowing among young people.

The consumer champion has analysed official data which shows young people have an average unsecured debt of £12,215 – more than three times what it was before the financial crash between 2006-08, when the tally stood at £3,988.

In fact, it said the average total debts of young people grew by more than 200% between 2006 and 2012.

Citizens Advice pointed out that as well as an increase in the volume of debt, there have been changes in the types of loans young people are taking out.

While 45% of this debt rise is attributed to student loans the majority of the increase has primarily been driven by ‘formal loans’ – including bank and payday loans – and borrowing from friends and family.

The charity’s analysis showed a five-fold increase on the average formal loan, from £969 to £4,577 over the same period. Loans from friends and family also rose during this time, from an average of £30 to more than £1000.

In contrast, the credit card balances of this age group decreased from £332 to £234. Similarly, Citizens Advice data showed other age groups are twice as likely to go to the charity with credit card problems than 17-24 year olds.

The latest numbers showed that young people overall have an average debt to income ratio of nearly 70%, compared to 34% for 25-29 year olds and 11% for 60-64 year olds.

Gillian Guy, chief executive of Citizens Advice, said: “A new generation of young people are starting out with stifling levels of debt. Many young people already face challenges getting on the career and housing ladders – doing this while saddled with huge unsecured debts make it an uphill struggle.

“As well as looking for a longer term solutions, it’s important people can get independent advice, guidance and support about how they can manage their finances.”

The report added that UK households already owe £170bn in unsecured debt and forecasts suggest this could hit £350bn by 2020. Unsecured debt is growing faster than secured debt and faster than incomes, pushing debt to income ratios back toward pre-crisis levels by 2020.

Researchers also found shifting patterns in debt – five years ago, credit cards were the main debt issue Citizens Advice helped with but now council tax arrears top the list.

*Debt to income ratio by age-group for non-students (2010-12)

Debt to Income ratio

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