July 20, 2024


Mad about real estate

Mortgage Debt Will Affect Pensioners

A third of the UK population who are in or nearing retirement, owe a whopping £207 billion in outstanding mortgage debt; averaging at £37,316 per head reveals a new report from Key Retirement Solutions, the leading independent equity release specialist.

The findings released from analysis based on 4,507 people aged 55 plus who released equity in their home with Key Retirement Solutions in 2007, show that there has been an 20 per cent rise year on year in the average amount of mortgage debt owed by those in, or nearing retirement. Further analysis shows:

Thirty-two per cent of all over 55s have outstanding mortgage debt, while 35 per cent of those aged 60-69 years and 29 per cent of those 70 years and over still have mortgage repayments to make

Dean Mirfin, Business Development Director at Key Retirement Solutions said: “Whilst this analysis is based on those who have released equity from their home, if this is only part reflective of pensioners as a whole, then this is of huge concern. The rising cost of living is increasingly affecting all of us today, but it is the older generations that are feeling the pinch more than others.”

Key Retirement Solutions analysis shows that the average monthly repayment on outstanding mortgage debt for retirees is £218.  Industry statistics show that nearly two-thirds (62 per cent) of pensioner couples have a total pension income of less than £10,000, and this falls to less than £6,000 for half of single pensioners. Assuming for those receiving £6,000, their average monthly mortgage payment is £218, once this has been paid this potentially leaves just £282 to cover council tax, all utilities, food clothing and other expenses each month.

According to the Consumer Credit Counselling Service (CCCS), for the first time, clients over 60 have the highest levels of debt and they are increasingly seeking help – now equal to the number of under 25s who go to the for help with their finances.

Chris Tapp, Director of charity Credit Action, commented on Key’s findings.  He said: “These findings show that the financial difficulties of those entering, or already in, retirement show no sign of easing in 2008, if anything the picture is worsening.  At Credit Action, we are concerned that the stresses on household budgets that everyone is facing, whether it be rising food costs or higher utility bills, affect pensioners to a greater degree. This, coupled with the fact that people had to borrow more and for longer periods in mortgages as house prices have grown over the last few year, means that many are facing tough times and perhaps tough decisions, in order to keep their finances on track. It is vital that people who are worried take action, and the sooner the better.”

Dean Mirfin, Business Development Director at Key Retirement Solutions concludes: “Our analysis shows we are seeing more and more people reaching retirement still with outstanding mortgage debt. An increasing number of people are choosing to re-mortgage as an alternative to downsizing, carrying out improvements on their home, or even helping their children get that first step on the property ladder in today’s almost impossible market. As the cost of living continues to rise, more than ever people approaching retirement should be aware of the real threat debt poses to their finances in retirement and subsequently their lifestyle.”