Young Britons are being saddled with debt but are unlikely to build up assets in the same way as previous generations, a report commissioned by debt advice charity the Consumer Credit Counselling Service (CCCS) found today.

The research, conducted by the Financial Inclusion Centre think-tank, found that more than one million households containing 18 to 39-year-olds are struggling to cope and a further 893,000 are "at risk" of falling into difficulty.

Key Points

  • Younger generation saddled with debt
  • More difficult now to build up assets
  • Calls for tough laws to help vulnerable households

The Debt and the Generations report says that while debt levels currently peak around the time people turn 40, this situation could be changing, with consumers building up large levels of money owed at a much younger age.

Almost three-quarters of people aged 18 to 39 have unsecured debts, compared with around 60% of those in the 40 to 54 age group.

The report suggests: "This may be because younger consumers tend to be less financially aware and more inclined to rely on credit to make ends meet."

Younger households are more likely to be behind with their debts, with those in the 25 to 39 age group more than twice as likely to be in arrears or insolvency as those in the 55 plus group - 15% compared with 7%.

Rising house prices

The report says that rising house prices and reducing incomes made it unlikely that younger households will be able to acquire assets in the same way as their parents and grandparents.

Between 1997 and 2007 the typical house price grew from around 2.3 times to nearly 5.5 times gross earnings, meaning first-time buyers are increasingly reliant on the "bank of mum and dad".

Last year 45% of all first-time buyers received financial help, compared with a fifth in 2005, the report says.

For first-time buyers aged under 30, 84% need help with their finances in order to buy.

The report says: "This is leading to the exclusion of poorer young households from the housing market and perpetuating existing disparities in wealth within generations."

Older generation also struggling

The report says future generations would find it harder to invest in pensions until they were older, which will "considerably" impact on their quality of life.

It uncovered a "worrying issue" of a significant minority of older people who had built up big debts.

"Research suggests that 7% of those aged over 55 still hold secured debts greater than £150,000, who are struggling to repay them."

Researchers found that around 12% in this age group had a repayment-to-income ratio greater than 30%, compared with 9% of 18 to 24-year-olds.

"This indicates that some older households on lower incomes have been caught with expensive credit that is hard to escape," the report says.

Researchers predict a future increase in mortgage debt problems among older households as over-indebted "baby boomers" move towards retirement.

The study, which used published research and the debt charity's database, calls for tough consumer protection laws to help vulnerable households as well as guidance around the Government's plans to automatically enrol workers into pension schemes next year.