The average mortgage debt for those aged 65 and over is set to stand at £86,000 by the end of the year, new research has revealed.
According to equity release provider more 2 life, which commissioned the research, a high reliance on interest-only mortgages and modest pension savings are among the factors which could have contributed to rising debt.
Its study, which was carried out by the Centre for Economics and Business Research (Cebr), revealed by the end of the year the over 65s will have amassed a record £86 billion of secured and unsecured debt.
Homeowners aged 65 to 74 who were paying off a mortgage owed on average £120,000, which is 24% more than in 2013 and higher than the £113,000 owed by borrowers in the 55 to 64 year age bracket.
Meanwhile homeowners aged 75 to 84 with a mortgage still owe more than £78,000 on average which is an increase of 40% in five years.
The Cebr found around four in ten of those aged 65 plus had an interest-only mortgage – this was down 13% between 2014 and 2016.
In 2017 the reality far exceeded the expectations. Last year’s research predicted the total debt of over-65s would reach £65 billion but actually came in at £78 billion.
Indeed, the average mortgage debt held by 65 to 74-year-olds in 2017 was also higher than expected – breaking through the predicted £12,500 to hit £15,700.
Dave Harris, CEO, at more 2 life, said: “Our estimates show that the retirement lending market is growing even more quickly than previously expected and looks likely to surpass the £141 billion 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.”
Meanwhile, Dr Louise Overton at the College of Social Sciences at the University of Birmingham, said: “Among the growing numbers of older people carrying secured and unsecured debt into retirement, some may be doing so as part of a deliberate asset management strategy, but worryingly this report indicates that a significant minority are doing so to help manage cash flow problems and 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.”
