A lifetime of debt for a new generation of homeowners

A third of Britain’s over-65s are still paying off mortgage debt, according to equity release provider Key Retirement Solutions (KRS).

The report suggests that retired people in the UK face £140 billion of mortgage debt, with the average mortgage debt for those aged 65 and over currently standing at £43,069. And the burden does not appear to reduce with age, with the average mortgage debt of over seventies currently averaging £48,442, compared with £34,272 of 65-69 year olds.

The figures are based on the 3,826 people aged 65 or over who released equity from their home with Key Retirement Solutions in 2008. According to KRS, the number of pensioners who used KRS’s equity release services to relieve the burden of mortgage debt increased by 38.72% in 2008.

Speaking to Mortgage Introducer magazine, Dean Mirfin, group director at Key Retirement Solutions Group Director said:

“Whilst we expect that some of today’s pensioners will have the need to have an outstanding mortgage, we are concerned at the potential scale of the problem. Naturally the numbers used are specific to those who have approached Key Retirement Solutions for equity release, but that said, if they are even partly reflective of the scale as a whole, today’s and tomorrow’s pensioners face a retirement in a position of debt which they had maybe not anticipated.”

“It does not therefore come as a surprise that many of those faced with this scenario are looking to equity release as a solution to eradicate their mortgage debt to free up much needed income to further enhance their retirement years.

“Whilst many pensioners will be benefiting from the current low variable mortgage rates, many are on fixed rates which are considerably higher. In addition those lucky enough to have savings are suffering from the low levels of return since the rate cuts began in 2008.

“Many pensions linked to RPI face a slowdown in growth which will put yet more pressure on today’s pensioners. Many will look with interest at what Alistair Darling has to say in his budget statement this week to see what hope comes, if any, to help lessen the burden faced by so many of today’s pensioners, for whom little of what is designed to help the current economy will be of benefit.”