Unsecured Debt on the Rise Among Over-55s

Premier Equity Release
Premier Equity Release
11th August 2018

Unsecured debt among older borrowers has risen by over a third (34%) in the past four years, more than double the speed of the national average (14%). That’s according to research from more 2 life, the equity release lender, and the Centre for Economics and Business Research (Cebr).

The analysis revealed that 34% of over-55s currently have some form of unsecured debt, although those aged between 55 and 64 are the most likely to take out this type of borrowing (48%). This proportion falls to 30% for 65 to 74-year-olds and 15% for those aged between 75 and 84.

According to the data, unsecured debt for a typical 55 to 64-year-old stands at £4,865, compared to £3,452 in 2012. With a typical single pensioner’s monthly income coming in at £2,096, it means people in this age group currently have a debt-to-income ratio of 224%. Credit cards are the most common form of unsecured debt used by people aged over 55, with the data indicating that 30% spend more on their credit card each month than they pay off.

While some borrowers have used unsecured debt to invest in other assets (5%) or amass loyalty points such as air miles (5%), most have used it to pay for necessities. Almost a fifth (17%) have used debt for day-to-day expenses, 17% for home repairs or refurbishments, 22% to fund a large purchase and 17% to repay other borrowing. Other reasons for borrowing included financially supporting a family member (10%) and managing personal cash flow problems (19%).

The research also revealed that one in ten 65 to 74-year-olds is still repaying a mortgage, owing an average of £120,000 – up 24% from 2013. In fact, the mortgage debt of this age group is higher than the £113,000 owed by the average 55 to 64-year-old.

“While these figures might seem relatively modest and manageable while working full-time, it may well stretch the budget of someone in retirement on a fixed income,” said Dave Harris, chief executive of more 2 life. “With continuing issues around insufficient retirement savings and an increasing number of people entering retirement with other types of borrowing like mortgages, the problem is only going to get worse. As an industry, we need to do more to ensure customers are fully aware of all the options available to them, including how they can unlock their property wealth to achieve their goals of a stress-free retirement.”

At Premier Equity Release, we regularly help people aged over 55 who are looking to unlock the equity tied up in their property – with many using the funds to clear or consolidate their outstanding unsecured debts . For honest, impartial advice on your equity release options, feel free to get in touch today.