Millennials want mobile-friendly banking and fixed rate mortgages, but many are overwhelmed with student debt, as a slew of new reports out today has shed light on the finances of the UK’s young people.
Three quarters of graduates since 2011 will never pay off their full student loan, while high earners can expect to pay £40,000 in interest alone.
Changes since 2011 have sent student debt levels rocketing, with the interest rate hitting 6.1 per cent earlier this year. But the majority will never pay off the full amount, according to the Institute for Fiscal Studies (IFS).
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Poorer students were initially made better off by an average of £1,500 by reforms in 2012 because maintenance grants meant they had less debt than wealthier peers. But they are now likely to leave university £57,000 in debt for a three-year course, as they borrow more for living costs, whereas the average student owes £42,500 when they graduate.
Other figures released today show the impact their changing personal finances is having on the financial behaviour of millennials. Research by L&C capital today shows that 92 per cent of 18-34 year olds with mortgages choose a repayment plan rather than interest-only, compared to 68 per cent of those aged 55 and over opt for a repayment mortgage.
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Millennial home-buyers are also more likely to choose a fixed rate, with 69 per cent opting for this type rather than tracker mortgages.
However, a report released by Telstra today showed that the average total value of deposits and lending held by a UK Millennial is now 40 per cent bigger than other adult demographics. Financial institutions are locked in a race to secure the business of this lucrative group.
“Millennials, their consumption of mobile digital and wallet size have undoubtedly become lead indicators of performance for financial institutions,” said Rocky Scopelliti, Telstra’s global industry executive for financial services.”
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But the report warned that banks would need to adapt to mobile-first technology to retain young consumers or risk losing out to digital challengers.
“As digital challengers continue their relentless growth in the UK market, leveraging programmable disruptive technologies to transform and compete against new breeds of organisations is an imperative for traditional institutions,” said Mr Scopelliti.