New research echoes FCA’s concerns for the indebted youth

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 found the main reason for the use of short-term credit is for essential expenditure, such as paying household bills and necessary supermarket spends.

More than a quarter (29 percent) have three or more dependents, about four times the average for non-users of short-term credit (seven percent).

In addition, just under half of borrowers (46 percent) are homeowners. A total of 24 percent of short-term borrowers have both dependents and a mortgage, demonstrating the increasing financial pressures faced by families in the UK.

This report echoes a point highlighted by the FCA’s chief executive, Andrew Bailey, who today 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.”