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Study reveals up to half of older home owners using equity release for debt

Up to half of older home owners are using equity release to repay debt as they struggle to meet payments, a new analysis has found.

The study by independent equity release advisor Key, using customer data, suggests that 30% of people are using equity release to repay unsecured debt while 20% are using it to repay mortgages.

It says that debt is a growing issue with customers aged 55 and over having an average of £10,319 on credit cards and £13,578 on loans. The UK average for people with unsecured debts is £11,830 meaning that some over 5s could have more than double the average amount of unsecured debt.

The biggest single debt burden identified is outstanding mortgages with customers clearing home loans on average owe £87,181, the data shows.

Further analysis suggests that the debt issue spreads across age group. Customers in their 70s owe an average of £9,773 on credit cards compared with £10,926 for home owners in their 60s. However, even some customers in their 80s owe money on plastic with average debts of £10,443.

A significant impact of carrying debt into retirement is the cost of regular repayments. Customers are paying off an average £300 a month on credit cards, £282 on loans and £586 in mortgage repayments. That takes a substantial bite out of monthly income with those with credit card debt needing to use an average of 40% of the state pension, around £730 per month, on repayments before meeting other regular costs such as housing, utilities and general living expenses.

‘Juggling debt at any age can be stressful but with typically a fixed income, older people are likely to find it even more stressful than most. Clearly people in their 70s and 80s are having to balance how to keep up these repayments alongside maintaining their standard of living in retirement,’ said Will Hale, chief executive officer of Key.

‘For home owners, it makes sense to look at downsizing, equity release or other later life lending options to clear their debts and set them up for a more comfortable and less stressful retirement,’ he explained.

‘Good independent expert advice is key to ensuring that older home owners receive the most benefit from their property wealth and use it in the most appropriate way for them and their families,’ he added.