Tim Wheeldon, joint managing director of Fluent Money Ltd
As the middle-aged feel the squeeze, the secured loan sector needs to support those that are supporting others.
The last few years have been tough on UK consumers, as stagnating incomes, stunted career prospects and mounting debts left the nation in a state of financial instability.
For some consumers, this instability has only worsened over the years. This is because although the beginnings of the recovery have provided necessary relief for many, some have had to shoulder the burden of loved ones’ finances throughout the economic downturn.
This has resulted in the emergence of an unlikely borrower demographic – the middle-aged consumer. This new financially pressured age bracket started the recession fairly comfortably, but is now often supporting both ageing parents and adult children. Although consumers in their forties and fifties might have been relatively well off compared to their elderly or younger counterparts, the dual pressure of supporting both is now taking its toll, forcing them to consider alternative solutions to their financial plans.
Advisors are now encountering customers more concerned with simply paying the bills and accommodating family members than building long-term stability. The younger generation took a serious hit during the recession, and today 49 per cent of 20-24 year olds still live with their parents. The percentage of those that are unemployed living with their parents is twice that of those living alone, meaning that more often than not it is middle-aged parents sharing the load of the youth unemployment crisis.
We anticipate that the situation for jobseekers in their twenties will improve along the UK’s road to recovery, but a number of obstacles remain along the way. Despite the introduction of Help to Buy as a means of supporting first time buyers, many still fear a potential housing bubble, and it is estimated that the typical first-time buyer needs to raise 4.47 times their salary to make the necessary payments.
The financial services sector needs to appeal to the middle-aged borrower’s long-term arrangements, and help them carefully plan for the future. Those unaccustomed to looking after fragile bank balances need professional guidance to find the solution most appropriate to their situation.
Another contributing factor to debt amongst the squeezed middle-aged bracket is by resorting to non-traditional forms of credit arrangements, as they attempt to maintain their lifestyle without sufficient resources. The unfortunate truth is that although pay rises and job prospects might have stalled, consumer appetites remain undented by the recession, and the pressure from parents or children can be emotional as well as economic.
A recent study revealed that 13% of consumer debt is being accumulated by paying retailers weekly for furniture, appliances and gadgets, while one in 20 admitted resorting to ‘doorstep loans’. The rise of payday lenders throughout the recession has tapped into the vulnerability of those providing for extra people whilst attempting to sustain their existing standards of living, demonstrating the need for better information regarding stable payment plans.
It might be that customers are not fully aware that a secured loan could be more beneficial in the long run, as is often the case when monetary difficulties are bound up with property. Advisors need to offer practical guidance about spending on insignificant possessions to remove the need for a loan in the first place, then provide information about sensible plans should the situation warrant them.
No parent or child wants to neglect their loved ones, so compassionate advice is essential as the economy starts to find its feet again. Although the future looks bright for the nation’s personal finances, the secured loans sector cannot afford to overlook those still needing support.