Under-30s most in debt
Under-30s most in debt
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Friday, 21, Apr 2006 03:41
Young Britons have the highest level of debt but generally adopt a responsible attitude to borrowing, according to a new report.
Research by high street bank Alliance and Leicester has found that 18- to 30-year-olds are £7,718 in debt, excluding mortgage repayments, more than twice £3,740 debts incurred by the over 50s.
However, despite their chronic indebtedness, the report found that young borrowers use credit extremely responsibly, with 18- to 30-year-olds having the lowest level of credit card debt (£1,073), with student loans accounting for almost half (46 per cent) of their deficit.
By contrast, older borrowers, who are supposedly more financially responsible, in fact rack up the largest credit card bills, with the average 30- to 50-year-old currently owing £2,580 in outstanding card payments.
Chris Rhodes, managing director of Alliance & Leicester Retail Banking, believes the findings will help to dispel financial stereotypes about irresponsible young borrowers.
"Our research confounds the stereotype that young people are spendthrift and irresponsible with their finances," Mr Rhodes said.
"Student loans are their largest commitment and whilst the interest 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."
Nevertheless, while young borrowers may be holding back their credit card spending, the study found that under-30s have the lowest savings levels, with just £3,953 put aside on average, while one in three lacks any form of savings whatsoever.
Significant house price growth over the past five years coupled with an increasing trend to live in rented accommodation also means that just 22 per cent of under-30s have a mortgage, compared with 59 per cent of 30- to 50-year-olds.
The Alliance and Leicester report also highlights widespread regional variations in borrowing behaviour.
Scots are the heaviest debtors, racking up non-mortgage debts of £7,417, equivalent to 28 per cent of their income. However, this is offset by the lowest mortgages, with the average Scottish homeowner borrowing just £48,000 to help fund a house purchase.
Londoners, by contrast, have one of the lowest debt levels as a proportion of income, at an average of just 2.4 per cent, but astronomical house prices in the capital mean they have the largest mortgages, borrowing an average of £118,470.