Under-35s are trapped in debt
LIFE’S not so much Catch-22 for young renters as a case of Latch-22.
The more they want to save to get the keys to the lock of their own home, the higher their rent rises meaning they can’t afford to save.
Yet if they could just get a deposit together they would be quids in because it’s cheaper to buy with the current rock bottom interest rates than it is to rent.
Recent research from Halifax shows that across all regions, paying a mortgage instead of a landlord leaves you an average £651 a year better off.
In London, buying is the most affordable compared to renting with the typical first-time buyer paying £161 a month less on a mortgage than the average renter.
Andrew Hagger, an independent expert from personal finance website Moneycomms.co.uk, says: “It’s a real shame so many young people are trapped in a spiral of high rent costs when they could be taking advantage of some of the cheapest mortgage deals ever seen.
“For some people it may be worth biting the bullet and moving back in with their parents for a couple of years to secure that elusive deposit. It’s a hard decision to make once you’ve been used to your independence, but it will prove financially worthwhile in the long run.” STRUGGLING
It’s no wonder new research reveals under-35s are struggling to manage their money and many are forced to rely on credit to make ends meet.
Half would struggle if they got hit by an unexpected bill of £250, without having to turn to credit or a helping hand from the bank of mum and dad.
A new report, compiled over five years by credit firm Experian, reveals the widening gap between generations.
It identifies an emerging group, YERNS – young, earning, renting, non-savers. They are far more likely to use credit cards to make ends meet, take out unsecured personal loans and fall behind with bills.
Four out of five YERNS households have outstanding debt. Around two million have no savings whatsoever.
This contrasts with MORS – mature, owning, risk-averse savers – a more cautious generation with an average age of 69 who are far less likely to owe money.
Two-thirds of MORS are debt free, whereas more than a third of YERNS have credit card debt. And one in 10 has had to borrow from friends or family members to help pay for their rent or car costs.
Richard Jenkings from Experian, says: “Living in overdraft has become second nature for many under-35s. The result is many young families and individuals live beyond their means.
“And when unplanned costs occur, it can tip them over the edge.”