Brits aged over 65 are expected to amass a record total of £86 billion in debt by the end of this year, research from the Centre for Economics and Business Research (Cebr) and more 2 life has revealed. This marks an increase of £8 billion from last year's £78 billion total.
Given that last year's total was previously estimated at £65 billion, there's clearly a chance that this year's figure will surpass the £86 billion mark as well. Unsurprisingly, the biggest factor adding to the total is mortgage debt, with an average mortgage debt of £86,000 estimated for this year, marking an increase of 13% compared to 2013.
Those aged between 65 and 74 owe even more on their mortgage, at an average of £120,000, which surpasses what 55 to 64-year olds currently need to repay, at £113,000. One reason for this could be the prevalence of interest-only mortgages among over-65 year olds, with 42% still having one.
We've previously covered the dangers of having an interest-only mortgage without a plan for repaying your debt – which is why it's such good news that their number has recently halved – but that might not help those nearing the end of their term now. Those borrowers with an interest-only mortgage would do well to talk to their mortgage provider.
"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," Dave Harris of more 2 life stated. "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."
If you're over 65 and have loans, credit card debt or other some other costs that could use extra funds to tackle – maybe your retirement income isn't quite what you'd hoped it would be, for example – then equity release might be an option for you. It uses the equity/value of your home to give you a loan that only gets repaid after you've passed away. Of course, this will affect the inheritance you may leave behind, but leaving less of the value of your home to your loved ones could be preferable over leaving them with your debt to pay off.
Feel free to talk to an adviser if you're not sure what you want to do, and don't be afraid to talk to your loved ones if you're struggling with debt.
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