Baby boomer debt levels soar
Some 34% of over 55s have some form of unsecured debt, such as credit or store cards, overdrafts, loans, car finance, hire purchase, or payday loans.
But those aged 55 to 64 are most likely to have this type of borrowing, according to analysis by the Centre for Economics and Business Research (Cebr) and equity release lender – more 2 life.
The average 55-64-year-old had £4,685 worth of unsecured debt in 2016, compared to £3,452 in 2012. The typical single pensioner monthly income is £2,096 meaning this age group has a debt to income ratio of 224%.
The research suggests that credit cards are the form of debt used most often by the over-55s with 30% spending more on credit cards than they pay off each month.
The vast majority of over 55s said their unsecured debt was for necessities – 17% used it to cover day-to-day expenses and 19% said they used it to manage personal cash flow problems.
The research also reveals that one in ten 65-74-year olds are still paying off mortgages. They owe, on average, £120,000 – 24% higher than in 2013; and higher than the average for 55 to 64 year olds with a mortgage, who owes £113,000. This could in part be down to the fact that use of interest-only mortgages becomes more frequent among older age groups.
Dave Harris, CEO at more 2 life, said: “Our research clearly highlights the growing use of unsecure borrowing among older age groups, with debt rising by more than a third in just four years. While these figures might seem relatively modest and manageable while working full-time, it may well stretch the budget of someone in retirement on a fixed income.
“With continuing issues around insufficient retirement savings and an increasing number of people entering retirement with other types of borrowing like mortgages, the problem is only going to get worse.
“As an industry, we need to do more to ensure customers are fully aware of all the options available to them, including how they can unlock their property wealth to achieve their goals of a stress-free retirement.”