One in four people in, or nearing, retirement could be taking with them mortgage debts worth £98 billion collectively - an average of £31,000 per head – reveals a report from Key Retirement Solutions, the UK’s largest independent equity release specialist.
The analysis, based on 4,620 over-60s who released equity in their home in 2006, found that the average mortgage debt among those aged 60-64 years is £23,512 which rises to £29,000 between the ages of 65-69 years. Worryingly, this amount increases again to £37,000 each in the over 70s group, with the over 70’s mortgage debt 27.5 per cent higher than in any other age group.
Dean Mirfin, Business Development Director at Key Retirement Solutions, said: “We are seeing increasing numbers of over-60’s coming to us with mortgage debt that they are struggling to manage and looking for a way to ease the burden of debt in retirement. With the rising trend in higher levels of borrowing, and fewer people saving for retirement, this could be a time-bomb waiting to hit the next few generations of pensioners even harder than we’re seeing now. Whilst this analysis is based upon those who have released equity from their home, if they are only partly reflective of pensioners as a whole, it has to be of huge concern to us all.”
Chris Tapp, Associate Director of charity Credit Action, comments on Key’s findings: “Unfortunately, in this day and age, someone’s hair turning grey is not an indicator of their bank balance being any less in the red. Key Retirement Solutions’ findings demonstrate the very difficult situation a sizable number of pensioners find themselves in, trying to cope with debt repayments as well as rising living costs. At Credit Action we are also concerned that this is a trend which is only likely to get worse as we see people borrowing more, borrowing for longer and saving less in a desperate attempt to get a foot onto the housing ladder.”
Struggling to make ends meet
Official statistics show that over half of the British pensioner population live on £15,000* or less each year, with 1.4 million pensioners living on an annual income of £5,000* or less. After paying for council tax and utility bills, this leaves the worse off with the equivalent of just £257 per month. Key Retirement Solutions’ own analysis has found that the cost to a pensioner to service outstanding mortgage debt is £215 a month and this could leave the most vulnerable with just £42 left to live on.
Notes to editors:
Statistics show that housing equity significantly outweighs mortgage debt. In 2006, the value of the private housing (£3.8 trillion) was 3.5 times the value of outstanding mortgage debt of £1.1 trillion*. Releasing the cash locked in a home can be a solution to paying off mortgage debt in retirement, although anyone considering equity release should always seek specialist independent advice.
#According to the Office of National Statistics, the total UK pensioner population numbers based on latest population figures (2005) is 18.7 million. According to Key Retirement Solutions’ Debt Report 47% of pensioners have debt (8,789,000), of which 36% is mortgage debt (3,164,040) multiplied by the average mortgage debt of £31,000 = 98,085,240,000.
*Sourced from Credit Action February 2007
About Key Retirement Solutions
Key Retirement Solutions is the UK’s leading independent equity release specialist. It currently conducts 31% of all SHIP (Safe Home Income Plans) intermediary equity release business in the UK.
Key’s commitment to excellent service has been recognised by the financial services industry though a series of prestigious awards:
- Financial Adviser Equity Release IFA/Whole of Market Adviser of the Year 2006
- Financial Adviser Equity Release IFA (Firm) of the Year in 2004 and 2005
- Mortgage Introducer - Best Equity Release Mortgage Broker in 2005 and 2006
- Mortgage Strategy - Best Mortgage Broker, Specialist Lending (2004) and Best Equity Release Mortgage Broker 2005 and 2006
- Mortgage Solutions - Best Financial Adviser (Home Reversion),Best Financial Adviser (Lifetime Mortgages), Top Financial Adviser (10 employees or more in 2005 and 2006
- What Mortgage - Best Equity Release Mortgage Broker in 2006.