UK Youth Saddled With Unsecured Debt

Figures released by the Alliance & Leicester show that people under the age of 30 have the highest levels of unsecured debt in the UK, with the average young person owing around £8,000.

According to the Alliance & Leicester, those aged between 18 and 29 owe approx. £7,718 each through various forms of unsecured debt such as credit cards, loans and overdrafts. Worryingly, these figures are the equivalent of 36% of their total household income, thus putting a strain on personal finances and making it more difficult to save for their future.

This figure is more than double that owed in non-mortgage debt by the average person over 50 whilst also being higher than the average debt of £7,301 owed by those aged between 30 and 50, which equates to 23% of their household income.

It isn’t all doom and gloom however, as the group pointed out that while young people had the highest overall levels of unsecured debt, half of it was comprised of student loans, which are reasonably cheap to service.

This means that 16 to 30 year olds spend just 3.1% of their income on interest repayments, the same amount as 30 to 50 year olds.

Young people are also more likely to have an overdraft as well with 50% having one compared with 38% of 30 to 50 year olds, with 3 out of 10 of the under 30’s servicing overdrafts of over £1,000.

As well as having an overdraft, young people are also twice as likely as the over 30’s to be permanently overdrawn, and three times more likely to have gone over their overdraft limit in the last six months.

However, whilst the young may have highest levels of unsecured debt, they have the lowest levels of credit card debt among the aforementioned age groups. On average the under 30’s owe £1,073 on their plastic, compared with the £2,580 on average owed by those aged between 30 and 50, and below the average debt of £1,556 owed by the over 50’s.

When it comes to mortgages, only one in five people in the UK under 30 have one, compared with 59% of people between 30 and 40.

Chris Rhodes, managing director of Alliance and Leicester Retail Banking, said: “ Our research confounds the stereotype that young people are spendthrift and irresponsible with their finances.

“ Student loans are their largest commitment and whilst the interest rates on these are low, it still seems to constrain their appetite for other debt.

“ The interest burden of this age group is not out of line with older groups. Indeed, 30 to 50 year olds see their debt burden peak as unsecured debt combines with mortgage borrowing.”

Alisdair Milton
26/4/06

 

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