There has been a fundamental shift in UK consumers' attitudes to debt in a relatively short time which is putting many in danger of financial meltdown, according to research commissioned by Standard Life Bank.
The Personal Finance Research Centre uncovered evidence that a significant minority of young adults are relying upon borrowing to finance their day-to-day expenditure. They are also benefiting from the generosity of parents who believe that it is their duty to provide for their grown up children. As a result a number of young adults are living beyond their means and hoping that their parents, insolvency or rising levels of equity in their property will provide the ideal debt solutions.
However, young adults are those who also tend to have the highest mortgages and therefore the least equity in their homes. So, not only do they have to meet bigger mortgage repayments, they are more susceptible to interest rate increases, and have much more to lose if price houses stall or even start to fall. But, even if they can't rely on that route those identified in the research believed that debt consolidation or insolvency would be a painless and easy route out of their problems.
Rather interestingly, the research highlighted the fact that those adults are now unable to distinguish between 'need' and 'want' and therefore have unreasonably high expectations of their living standards. That, combined with years of easily available credit, is allowing them to spend beyond their means, and incur high levels of debt to which they become blasé believing that a solution will inevitably 'come up'.
Chief Executive of Standard Life Bank, Anne Gunter said: "Credit is not only freely available but it is considered a way of financing lifestyles rather than reflecting need. A seismic change in the mindset of some people is required is we are to unwind the chronic debt issues faced in the UK. Pinning your hopes on housing equity or believing that insolvency is an easy way out of debt is financial suicide."
But, despite the findings of this research The Consumer Credit Counselling Service (CCCS) insists that it only affects a minority of the UK population, and that only 7% of borrowers get into financial difficulty.
CCCS chairman Malcolm Hurlston said: "Borrowing is a sensible way for 93% of people to manage their finances, but for those who get into difficulty they should seek professional debt management advice as soon as possible."
He also expressed concern at the accepted assumption that property prices would always rise and therefore act as debt solution if needed as worrying. Conversely, he also believes that owning a home could actually make a borrower's financial situation worse.
Andrew Regan
