18 to 25-year-olds are driving a surge in demand for consumer credit products, in a sign that financial confidence is returning after the Covid-19 pandemic.
According to a new report from Equifax, young consumers are helping to push the UK’s consumer credit market to pre-pandemic levels.
Between November 2020 and August 2021, credit applications more than doubled. 18 to 25-year-olds are now making more credit applications per month than before the pandemic.
Overall, credit applications have doubled since reaching a low in December 2020, hitting a post pandemic peak in May 2021 and remaining high throughout the summer.
“We should be careful of writing off this growing demand for credit by younger people as a blip, not least because it has lasted all summer,” said Paul Heywood, chief data and analytics officer at Equifax UK.
“The 18-25 year-old age group have had a hard pandemic, some have managed to save more than usual, others have struggled to achieve their goals, and many it seems are turning to the credit industry to help them make the most of the reopening economy.
“We can expect some of this demand to taper in Q4 as the stamp duty holiday disappears in the rear view mirror, yet with Christmas looming and buy-now, pay-later booming, we can be fairly sure that young people will continue to enter the credit market en masse.”
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Equifax data also found that credit card utilisation is on the rise, particularly among sub-prime borrowers.
The lifting of lockdown restrictions has also seen a surge in credit card use for non-essential spending. Spending on entertainment has risen by nearly a third (32 per cent) since mid-May, whilst the booking of flights and holidays has increased by a quarter (25 per cent) across the same period.
“This summer, we’ve seen consumer borrowing and spending habits edge towards a semblance of life before the pandemic, with demand for mortgages, motor finance, and credit cards all increasing in recent months, despite the government winding down a number of emergency support measures,” added Heywood.
“This is a positive sign that financial confidence is returning across the UK, even as we look ahead to rising inflation and what seems like an inevitable interest rate rise, which may deter some from borrowing.”