Over 65s debt expected to hit £86bn by 2018-end
More2Life commissioned the Centre for Economics and Business Research (CEBR) to carry out the study, which predicted that the total debt of over 65s would only reach £65bn in 2017 where the reality was £13bn more.
Retirement lending market borrowing includes all types of secured and unsecured debt including mortgages, credit cards, car finance and payday loans.
The market size was just over £50bn in 2013 but almost doubled in five years. The debt amounts are growing steadily too, outstripping expectations to hit £15,700 in 2017 and rising to £17,100 in 2018.
In 2018, the average mortgage debt of those aged 65 and over will stand at roughly £86,000, 13% higher than in 2013. This generation’s use of interest-only mortgages, their borrowing trends and relatively modest pension savings will have contributed to the rise.
Other findings include the fact homeowners aged 65 to 74 with mortgages outstanding owe £120,000 on average, and those aged 75 to 84 who are paying off a mortgage owe over £78,000 on average – up 40% in just five years, from £56,000 in 2013.
Dave Harris, chief executive officer at More2Life, said: “Our estimates show that the retirement lending market is growing even more quickly than previously expected and looks likely to surpass the £142bn mark by 2027. This rapid increase will only be exacerbated by an ageing population, people buying houses at a much later stage, and shrinking pension pots resulting in low retirement incomes.”
Dr Louise Overton, College of Social Sciences, University of Birmingham, added: “A growing number of older people are facing important decisions about how to manage their income and assets over a longer period than previous generations, presenting both opportunity and challenge for the later life lending sector.”
However, she added that where some are deliberately managing assets, a ‘significant minority’ are doing so to help manage cashflow problems or make ends meet.
“The use of housing wealth-based products like equity release has the potential to play a hugely important role, relieving budgetary strain and offering more financial freedom,” she added.