Are pensioners heading towards mortgage debt time-bomb?

One in four people in, or nearing, retirement could be taking with them mortgage debts worth £98 billion collectively - an average of £31,000 per head – reveals a report from Key Retirement Solutions.

The analysis, based on more than 4,600 over-60s who released equity in their home in 2006, found that:

The average mortgage debt among those aged 60-64 years is £23,512
Rising to £29,000 between the ages of 65-69 years.
Worryingly, this increases again with the over 70s owing £37,000 each
The over 70’s mortgage debt is 27.5 per cent higher than in any other age group

Dean Mirfin, Business Development Director at Key Retirement Solutions, said: “We are seeing increasing numbers of over-60’s coming to us with mortgage debt that they are struggling to manage and looking for a way to ease the burden of debt in retirement. With the rising trend in higher levels of borrowing, and fewer people saving for retirement, this could be a time-bomb waiting to hit the next few generations of pensioners even harder than we’re seeing now. Whilst this analysis is based upon from those who have released equity from their home, if these are only in part reflective of pensioners as a whole, it has to be of huge concern to us all.”

Chris Tapp, Associate Director of charity Credit Action, comments on Key’s findings: “Unfortunately, in this day in age, someone’s hair turning grey is not an indicator of their bank balance being any less in the red. Key Retirement Solutions’ findings demonstrate the very difficult situation a sizable number of pensioners find themselves in, trying to cope with debt repayments as well as rising living costs. At Credit Action we are also concerned that this is a trend which is only likely to get worse as we see people borrowing more, borrowing for longer and saving less in a desperate attempt to get a foot onto the housing ladder.”

Struggling to make ends meet

Official statistics show that 1.4 million pensioners live on an annual income of £5,000 or less. After paying for council tax and utility bills, this leaves the equivalent of just £257 per month. Key Retirement Solutions’ own analysis has found that the cost to a pensioner to service outstanding mortgage debt is £215 a month, and this could leave the most vulnerable with just £42 left to live on.

More than 38 per cent of pensioners get by on £10,000 or less a year, and over half of the British pensioner population live on £15,000 or less each year - which clearly shows the average mortgage debt could be un-manageable even on slightly higher levels of retirement income.