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Average Pensioner Struggling with £34,000 Debts

20 April 2016

The average pensioner paying off debts with their property wealth owes more than £34,000, analysis from leading over 55s retirement specialist Key Retirement (1) shows.
 
Its data shows nearly one in three (31%) of equity release customers are clearing debts run on credit cards, loans and mortgages with the average figure only telling part of the story.
 
Around 21% of homeowners using their property wealth to sort out their retirement finances owe more than £50,000 while one in 14 (7%) owe more than £100,000.
 
The analysis reveals mortgage debt is the biggest issue for retired homeowners and Key believes interest-only loans are the main driver. More than two-fifths (43%) of those in debt used equity release plans to clear mortgages paying off an average of £63,000.
 
However credit card debts are also a major issue as retired homeowners battle to maintain their lifestyles. Around 26% tapped into their homes to pay off card debts totalling £10,000 and 23% of customers released equity from their home to pay off outstanding loans worth on average £10,900.
 
The older customers are the higher the debt - those aged between 71-75 were the most likely to release money from their home to cut debts while male customers are much more likely to be in the red than women. Around 61% of those clearing debt with property wealth were men compared with 39% of women.
 
Key believes pensioners are increasingly using equity release as the first wave of interest- only mortgages begin to mature piling the pressure on older homeowners who are struggling to pay capital sums while juggling unaffordable credit card, personal loan and overdraft debts.
 
Dean Mirfin, technical director at Key Retirement (www.keyadvice.co.uk), said:
“It’s worrying to see so many pensioners continuing to retire with outstanding debts, affecting their ability to enjoy a comfortable retirement. With many lenders unable or unwilling to offer older borrowers new mortgages equity release is an obvious solution.
 
“Pensioners are cash poor but property rich and tapping into their housing wealth can help reduce debts as well as supplement other income, freeing up capital for them to afford a more comfortable standard of living or help out family and friends.”
 
The table below shows how average debts break down for customers using equity release.

   
 TYPE OF DEBT Average owed
Credit Cards £10,010
Loans £10,913
Mortgages £63,371
Others £31,168
Overdrafts £5,665
AVERAGE £34,111
 
 
Anyone looking to release equity from their home can get Key’s independent guide to equity release by calling 0800 531 6027 or visiting www.keyadvice.co.uk/equity-release/request-a-free-guide

Notes to Editors
  1. Key Retirement  analysis of data from customers taking out equity release plans in 2015