Baby Boomer lifestyles "are coming home to roost" as defaults on credit payments rise, credit information provider Veda Advantage said. Boomer credit defaults rose by almost 20% in September from the same month a year ago, while overall defaults were up by less than 7%. (Update 1 following interview with John Roberts.) Credit defaults by those aged between 44 and 62 were up 19.4% from September 2008, while defaults by Generation X (aged 28-42) rose 3.6% and Generation Y (under 28) defaults fell 2.3% in September, Veda said. "The statistics show the lifestyles of the Baby Boomers are coming home to roost "“ they are defaulting on debts mounted up over the years which they can now no longer service "“ the recession has seen many Baby Boomers lose their jobs while others have had their wealth eroded," Veda Managing Director John Roberts said.
Roberts said the "real hotspot" of Boomer defaults was in retail finance: "widescreen TV's and things like that". Retail finance defaults by Boomers in the first nine months of 2009 were up 17.1% from the same period in 2008, while banking defaults were down 18.6% and other finance defaults were down 8.5%. Telco defaults had stabilised and were up 2.3%, Roberts said. This compared to a 15.3% rise in telco defaults in the first nine months of 2008 from the same period in 2007. However, Roberts said Boomers were also back seeking mortgage money during 2009. "Figures for the first nine months of the year to September 2009 show an 18.6% increase in mortgage applications from Baby Boomers compared with the previous year," he said. "Overall mortgage applications are up 12.99% for the first nine months to September 2009 compared with the previous year. This is the first increase in applications for this nine month period since 2005." "On top of this September 2009 shows the largest number of mortgage applications for the month of September since 2005." "The January to September 2009 statistics also show hire purchase applications down by 25.1% and credit card applications down by 10.7%." "The statistics reflect a recent Veda Advantage survey of demand for credit amongst the general population." "It found that while almost half of the people surveyed had made a significant purchase in the last 12 months, more than half (56%) had paid with cash, EFTPOS or a cheque. And while a majority of those surveyed were planning significant purchases in the next two years a clear majority (62%) planned to pay with cash, EFTPOS or a cheque." "It is clear the recession has changed the way people think about spending "“ they are cutting back on their use of credit and they are starting to save for big purchases so they can pay upfront." "Veda is seeing the recession start to flatten in terms of the credit demand cycle, and it will be interesting to see if people are more aware of how they fund their spending in the future." Roberts said the decline in credit applications was starting to "plateau off a bit" with personal loan and mortgage applications the two areas starting to show less negative growth. However, hire purchase and credit card applications, of which Generations X and Y are the main users, were still slowing.