26/05/2018 by Desmond O'Hara CeMAP CeRER Equity Release Council Advisory Panel member 0 Comments
Pensioners set to rack up £86billion in debt by the end of the year - more than double the level of five years ago
Borrowing is accelerating at a faster rate than predicted
IT'S TIME TO HAVE A BETTER CONVERSATION ABOUT USING PROPERTY TO FUND RETIREMENT
For our FREE comprehensive guide to Equity Release, please like our Facebook page or contact us here
Pensioners are forecast to have amassed a total of £86billion in debt by the end of the year, up by £35billion from just five years ago, research suggests.
And worrying data from the Centre for Economics and Business Research indicates that the rate at which over-65 debt is accruing is accelerating.
Last year’s research predicted that the total debt of over-65s would only reach £65billion in 2017 – but in reality, borrowing was growing significantly faster and the total is now forecast at £13billion more.
The retirement lending market includes all types of secured and unsecured debt including mortgages, credit cards, overdrafts, loans, car finance, hire purchase, student loans, payday loans, and store cards.
The research, which was commissioned by equity release lender More 2 Life and is based on data from the Office for National Statistics, also found that homeowners aged 65 to 74 who are paying off a mortgage owe an average of £120,000.
This is 24 per cent higher than in 2013 and £7,000 higher than the average for 55 to 64-year-olds currently repaying a mortgage.
Those aged 75 to 84 who are paying off a mortgage owe over £78,000 on average – up by 40 per cent in just five years, from £56,000 in 2013.
Dr Louise Overton of the University of Birmingham said that among the growing number of older people carrying secured and unsecured debt into retirement, some may be doing so as part of a deliberate asset management strategy.
'But worryingly, this report indicates that a significant minority are doing so to help manage cash flow problems and make ends meet,’ she added.
More 2 Life added that the generation's use of interest-only mortgages, as well as their borrowing trends and relatively modest pension savings, are likely to have contributed to the rise in debt.
David Rodger, chief executive of the charity Debt Advice Foundation, said: 'There are many reasons for the increase in debt among the over-65s.
'Not only are we seeing higher numbers of people than ever before carrying unsecured debt like credit cards and overdrafts into retirement, but we’re also seeing more homeowners entering later life with mortgage debt still in tow.'
Rodger added that as income naturally falls during retirement, outgoings and income shocks can become more difficult to manage.
A great article by @MailOnline and comprehensive study carried out by CEBR and our friends at More 2 Life.