Recent years has witnessed a lending boom in the UK, with borrowing at its highest levels since before the financial crash.
With debt levels so high it seems all sections of our society are being affected as more and more people in the UK start to struggle with the level of their debt.
Britain’s household debt mountain has reached a new peak, with UK homes now owing an average of £15,385 to credit card firms, banks and other lenders, according to the TUC.
The trade union body said household debt rose sharply in 2018 as years of austerity and wage stagnation forced households to increase their borrowing – and that has continued into 2019.
And it seems the younger generation is taking the brunt of this as typical borrowing for them starts at only 23 years old as graduates, as they are already facing £9,000 in fees alone a year.
By their late 20s we reach a borrowing peak (MoneySuperMarket) as our financial responsibilities start to kick in but people in the UK are an average of two years away from hitting the national average salary of £28,200.
However, with the average age of the first-time parent now be 32, many people are hitting a salary high only to immediately have it snatched away, either by maternity leave or the £230,000 it now costs to raise a child to their 21st birthday.
All this means that by the time we hit 35, we’re facing a financial meltdown – the peak age at which we are most likely to be juggling the cost of young children, mortgages and loan repayments for cars, holidays and weddings.
Not that borrowing stops there. In our late 30s, with larger house prices and the introduction of new stamp duty tariffs, families are less likely to take on new debt in a new home than they are to apply for a personal loan for home improvement, at least until aged 44, now the most common age for divorce.
And with the different age brackets there is a difference to what level and what kind of debt you could be in.
According to research by debt charity Step Change the people coming to them for advice are getting younger and younger, as almost two-thirds of their clients were under 40 over the past five years, and they have seen a 10% increase in the number of under 40s contacting them since 2013.
StepChange are also convinced that middle-age is when most people are likely to encounter a debt problem because of ill health. Even more than the over 60 age group.
They also state that over half of their clients in the 40 – 59 age bracket claim that ill health is the primary reason for being them in debt.
Ill health can lead to additional debt because of the loss of income from missing work, and measures that are taken to bridge the gap, such as taking out a payday loan, can make the problem worse.
A redundancy and a reduction in working hours can also lead to an increase in borrowing, and this working age group is most likely to be hit with both.
The debt burden for young people is growing, but debt is still a problem for the over 60 age group.
Research from Old Mutual Wealth, which was based on a YouGov survey of people aged 50 – 75, found that 30% of retirees were in debt and that one in ten owed over £100,000.
Debt for this age category included mortgages – with 21% of retirees still paying off their house after retirement – as well as credit and store cards (14%), and unsecured loans (6%).
The average debt owed by this age group was £34,600.
And Mark Baird (Insolvency manager at Get Help With Debt) – who has 15 years experience in the industry, says all age groups have been caught up in the debt trap in different ways.
“Twenty to 30-year olds would mainly have credit card debt or store card debts. They would have varying levels of debt. People could have around £6,000 and some can have over £20,000 of debt.
“You find that these people are not usually home owners and therefore they are struggling to clear their debts to allow them to save for a mortgage to get on the property ladder.
“They usually have just come out of university with high debts through bank loans. Not student loans but student loans they get from the bank. But you find that 20 to 30-year olds have been saddled with large debt from university and are finding it difficult to get out of that situation.
“We are in terrible economic times, so people should be trying to draw a line in the sand now so they can get rid of their debt and start saving for a house.
“Because it is a pointless exercise if you are paying for your debt and trying to save for a house. It is pointless because you are paying interest on your debts so you should clear your debts first and then save, rather than trying to clear your debts and save.
“Because your savings are not earning the kind of interest you are paying on your debt. You should get rid of your debt before you start saving,” he added.
Debt issues of 35 to 40-year olds?
“When we get to 35 to 40 years of age, these are usually people who have started families and got their foot on the property ladder, which means they have minimum equity because they have been in the house a short period of time.
“They then start a family and they start to borrow. And because they have a house, they find it easier to borrow. They can get loans, credit cards and start borrowing for the needs of the family.
“Maybe one is out of work to look after the kids, so they have to borrow again. Then when the partner returns to work, they find out that they have childcare costs.
“That eats into the budget and they are finding that they are using more credit to stay afloat. It then becomes a vicious circle because they are borrowing every month and then paying it back again. They are just paying the interest on it. These people generally have higher debts.
“These debts could be in the region of 20 to 40 thousand pounds, or even higher. They are home owners, so they have easier access to unsecured debts because lenders are more likely to lend if you have a property.
“They might want to grow their family and don’t have the money to do that or to improve where they live. It’s all about getting these people to realise that are they realistically going to be able to get out of their debt situation between five to six years or is it going to be as longer-term thing?
“Everyone thinks positively, and they never think they won’t get out of debt. The reality is that they will probably never get out of it. It is about pressing the reset button and drawing that line in the sand and trying to move on with their lives.
“Sometimes you have to stand still before moving forward. The reality is that they will fight it for years and it really is all about pressing that reset button.”
People in their 40’s and 50’s with debt issues?
“As for people in their 40’s and 50’s, they are like people in their 30’s. They are usually more established and have been fighting their debts over a few years.
“They are people who just can’t get of debt and have been fighting to pay it off. It can be more difficult because they have paid off part of their house and have equity. And on paper it looks as if they have an asset that is larger than their debt, so they are asset rich and cash poor.
“That doesn’t mean you can’t get out of the situation, but you should take advice. Everyone is different, every lender is different. You could have a lender who is good or a lender who is bad. But you will not know that yourself.
“You should just get professional help and talk to people who know what way the lender will respond. There is no real right or wrong answer, but you must look at the situation, speak to someone who knows what they are doing and how the lenders look at these things.”
People who are 60 plus?
“People who are 60 plus think that they should be retired by now and they may have more equity in their home, but you find the last thing they want to be doing is working into their 70’s.
“They need to see how they see their future going and there is no point in working until they are 75 and then looking at how to deal with their debts. Do it now and get professional advice and get it sorted out.
“Because they could just be working to repay their debts and they are getting no benefit from that.”
And remember lenders listen to advisers, negotiators and facilitators they respect. If the debtor’s case is made to them by professionals who have proven knowledge, they will do business.
Lenders know that a Get Help With Debt settlement proposal is only made after a thorough examination of all the facts.
Lenders want the issue resolved as much as you do. Get Help With Debt never makes judgments as we are all human and everyone makes mistakes! It’s how you fix those mistakes that matters.
We are Financial Conduct Authority regulated and if you find yourself in debt stress have a no obligation chat with one of our experienced advisors today on 02890 393626.