Are UK homeowners heading towards a £207 billion mortgage debt time-bomb in retirement?

One in three Brits aged over 55 years still have outstanding mortgage debts Key Retirement Solutions' figures show a 20% increase in the average amount of outstanding mortgage debt among over 55s year on year.

Over-70s are most at risk with average mortgage debt of £45,4934

A third of the UK population in, or nearing retirement, owe a whopping £207 billion1 in outstanding secured loans - averaging at £37,3165 per head - reveals a new report from Key Retirement Solutions, the leading independent equity release specialist.

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

A third of all over-55s have outstanding mortgage debt (32%), while 35% of those aged 60-69 years and 29% of those 70 years and over still have mortgage repayments to make The average mortgage debt owed by those aged 55-59 years is £29,0836 This amount increases with age to £31,3687 for those aged 60-64 years and £32,8718 for those aged 65-69 The over-70s have seen a 23%9 increase in the level of outstanding mortgage debt compared to 2007, and now owe on average £45,4934

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. With new estimates from Age Concern putting the number of pensioner households living in fuel poverty at 2.25 million10, with an estimated 250,000 pensioner households pushed into fuel poverty by the price rises this year alone, many have little income left to enjoy their twilight years."

Their findings showed that the average monthly repayment on outstanding mortgage debt for retirees is £21811. Industry statistics show that nearly two-thirds (62%)12 of pensioner couples have a total pension income of less than £10,00012, and this falls to less than £6,00012 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.

Chris Tapp, Director of charity Credit Action, comments on Key's findings: "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"

Author's Bio: 

Christian is an author of several articles pertaining to Mortgages. He is known for his expertise on the subject and on other Business and Finance related articles.