Younger generations are starting later and taking longer to achieve similar levels of wealth to those who are reaching retirement today, as analysis in the FCA's Discussion Paper 19/2: Intergenerational Differences demonstrates. In fact, the average millennial may not ever acquire the levels of wealth of the average baby boomer today.

Buying a property is one of the main ways to increase wealth and younger borrowers strive to achieve this. UK Finance data shows that in 2018, 51 per cent of all home-owner home purchases were first-time buyers, a significant increase from 39 per cent in 2009. What has driven this change? Mortgage term lengths, and the availability of longer-term mortgages have both increased significantly. The mean mortgage term has increased from 26.8 years in 2009 to 29 years in 2018. This indicates that while there are more first-time buyers getting on the property ladder now than ten years ago, they are taking out longer mortgages so that it is more affordable. This makes sense, as affordability rules were tightened post the credit crisis.

It is of no surprise that affordability is likely to remain an issue for younger borrowers. The changing nature of income is a factor, where income fluctuates because of zero hours working or the gig economy. These challenges need to be understood and managed by lenders, who can take a long-run view of the consumer's ability to make sustainable repayments over the term of the product. The regulatory framework should enable lenders to respond innovatively to younger borrower needs.

What can be done to support younger borrowers to ?catch-up?? In our response to DP19/2, UK Finance suggests that the FCA considers options to improve the use of credit information and how affordability assessments could better reflect the needs of younger borrowers.

For those consumers with few consumer credit agreements - for example, younger borrowers - inclusion of other household bills helps to increase the understanding of their credit history. Increasing data available in relation to those consumers who do not have much information held at credit reference agencies (known as thin files) would help this customer segment. The Financial Inclusion Policy Forum, which UK Finance is a member of, has recommended access to reliable non-traditional data - such as council tax or HMRC data - as part of the work on affordable credit.

The FCA could also explore greater use of rental payments in the income assessment for tenants looking to access mortgages. For younger generations or customers in certain geographical areas, the cost of rental payments may be a barrier to building a suitable deposit despite a reliable income. Although it is not a like-for-like comparison, the cost of servicing a mortgage may be lower than paying rent. The FCA could consider what can be done to place more relevance on good rental payment history along with the wide range of factors considered as part of an affordability assessment.

We are pleased to see the FCA engaging with innovative ideas to meet the changing financial needs across generations and we look forward to working with them in their next stages of thinking.