Effect of rising debt on Gen Y worrying: NCB

According to NCB’s consumer-credit database, in the first nine months of the year Gen Y consumers took out a rising number of loans – housing, auto and unsecured – while the level of debt delinquency among this generation was also on the rise, the bureau’s chief executive officer Surapol Opasatien said. 

The NCB is worried about Gen Y individuals, especially those who have been working between one and three years and who have created more debt during that period, as an increasing number are so concerned about their repayment ability they are unable to concentrate fully on their work, he said.

If the income of Gen Y borrowers failed to rise sufficiently next year, their debt-repayment ability would be impacted even further and informal debt would be the solution for this generation, he warned. 

“We have organised a road-show at many firms to provide financial planning to Gen Y employees. Yet, we hope the situation of huge Gen Y debt will not intensify in 2016, because financial institutions will tone down consumer lending in the first six months of the year and will shift to people who have a monthly income of Bt30,000-Bt50,000,” he explained.

Surapol said in the first nine months, the proportion of Gen Y individuals  taking out a housing loan had increased to 46 per cent from 40 per cent in 2014, while the proportion of Gen X individuals doing so had fallen to 44 per cent from 48 per cent.

According to the credit bureau’s database, there were 250,978 newly opened mortgage accounts during the first three quarters of the year. 

Meanwhile, the NCB’s database of delinquent home-loan accounts from 2012 to the end of September this year shows Gen Y consumers have more late payments and a continually higher increase in non-performing loans than either Gen X borrowers – defined as those born after post-World War II baby boom – or baby boomers. The trend for both Gen X and baby boomers is a reduction in debt delinquency and NPLs during the period, the chief executive said.

For auto loans, new accounts are now mainly opened by Gen X and Gen Y consumers, with the latter accounting for 40 per cent of the total as of the end of third quarter, from 38 per cent at the end of 2014.

Auto-loan delinquency among Gen Y consumers from 2012 to September this year showed a continuous rise, while the rate for Gen X borrowers had stabilised since the end of last year.

As of September, the proportion of new credit-card accounts in the Gen Y and first-jobber group had risen to 50 per cent from 47 per cent in 2014, while the Gen Y delinquency rate had risen steadily during the period. 

The huge debt level from housing, auto and credit-card lending means the younger generation is increasingly seeking personal loans as the answer to their liquidity problems, Surapol said.