Divergent insolvency rates point to two-tier debt economy

– TDX Group comments

Following the release of the Insolvency Service Individual Insolvencies statistics today, Richard Haymes, Head of Financial Difficulties at TDX Group, an Equifax company, comments why there is an increasing propensity for those under 35 to enter into personal insolvency.

"The figures released by the Insolvency Service today show rapidly increasing insolvency rates for those under 35, with  25-34 year olds seeing the largest annual rate of increase (5.7%) between 2016 and 2017. The main driver of this change is increasing cost of living pressures which disproportionally affect certain age groups. Under 35’s are much more likely to live in private or social rental properties, have an element of income coming from welfare benefits, find themselves limited to higher cost credit products, as well as suffer from limited wage growth and higher unemployment.

"In contrast, there was a  drop in the insolvency rate for people over 55 between 2016 and 2017.  The lower cost of servicing mortgages has provided people in this age bracket, who are at risk of problem debt, with a much-needed buffer in their finances.

“The low interest environment has created a two-tier debt economy, with those on the right side of this line benefitting from cheap mortgages and reasonably low inflation, while others in rental properties experiencing higher living costs and becoming more likely to see credit transition into problem debt.”