The head of the Financial Conduct Authority has warned that a growing number of millennials are borrowing money to cover the basic cost of living.
Andrew Bailey told the BBC that 18- to 34-year-olds were facing a growing debt burden due to the generational shift pattern in income and wealth.
“There is a pronounced buildup of indebtedness amongst the younger age group,” he said. “We should not think this is reckless borrowing. This is directed at essential living costs. It is not credit in the classic sense, it is [about] the affordability of basic living in many cases.”
“There are particular concentrations [of debt] in society, and those concentrations are particularly exposed to some of the forms and practices of high-cost debt which we are currently looking at very closely because there are things in there that we don’t like,” he added.
In an aim to tackle debt among young people the FCA clamped down on payday lenders in 2015, which drastically reduced the number of people relying on the controversial lenders.
Despite this, consumer debt is still rising by an average of ten percent each year.
“There has been a clear shift in the generational pattern of wealth and income, and that translates into a greater indebtedness at a younger age. That reflects lower levels of real income, lower levels of asset ownership. There are quite different generational experiences,” Bailey told the BBC.
A report by Borrowed Years found that 37 percent of 18- to 24-year-olds are already in debt, and owe an average of £2,989. This is excluding student loans and mortgages.
Speaking about the gig economy, Bailey said: “Obviously we all question how long this can that go on for. But in aggregate it isn’t on its own something that we should be describing as a crisis.”
“I am not of the school of thought that credit should not be available to this section of society because credit should be there to smooth income in the classic sense, and we know there are more people with erratic income flows, that is one of the features of the so-called gig-economy.”