New research from the Centre for Economics and Business Research (Cebr) commissioned by equity release lender more 2 life estimates that over 65s will have amassed a record £86bn of debt in 2018, up from £78 billion in 2017. Last year’s research predicted that the total debt of over 65s would only reach £65 billion in 2017 – but in reality, borrowing was growing significantly faster and the total was £13 billion more.* The retirement lending market includes all types of secured and unsecured debt including mortgages, credit cards, overdrafts, loans, car finance, hire purchase, student loans, payday loans, and store cards.

The research found that the average total debt held by 65 to 74-year olds in 2017 was also higher than expected, hitting £15,700 instead of the predicted £12,500. This is estimated to increase to £17,100 in 2018.  Worryingly, in 2018, the average mortgage debt of those aged 65 and over is estimated to stand at £86,000, which is 13% higher than in 2013. While the rapid growth of debt amongst the over 65s is hard to attribute to any single factor, this generations use of interest only mortgages, their borrowing trends and relatively modest pension savings are certainly likely to have contributed to the rise.

Other key findings from the research include:

  • Homeowners aged 65 to 74 who are paying off a mortgage owe an average of £120,000, which is 24% higher than in 2013, and higher than the average for 55 to 64-year olds currently repaying a mortgage (£113,000)
  • 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
  • Around four in ten (42%) of those aged 65 and over have an interest only mortgage, down 13% between 2014 and 2016. 

Dave Harris, Chief Executive Officer 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 £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. For growing numbers of people aged 65 and over, financial products that draw on the resource of housing wealth may well turn out to be the optimal way for them to solve the financial challenges they and their families have to face in future.”

“Our industry is perfectly positioned to seize this opportunity and deliver the best possible financial outcomes to cater for this growing consumer need. As such, we must rise to the challenge and ensure the needs of consumers are being catered for.”

Dr Louise Overton, College of Social Sciences, University of Birmingham, said “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. 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. As the industry continues to bring new products to market, there is a definite need for a more joined up approach across the financial services industry, consumers and professional bodies, to foster the right environment for helping the market to develop more effectively. The many opportunities that this new retirement landscape offers can, and indeed should, be realised in a way that delivers the best possible outcomes for all consumers.”