Living longer will ‘double pensioner debt’ in a decade

PENSIONERS are set to take on billions of pounds more debt with the retirement lending market predicted to double in size by 2027, according to a study.

Borrowing by the over-65s will pass the £100billion mark by 2023, analysis has found. The average total individual debt of 65 to 74-year-olds will rise £10,000 over the next ten years to £22,700.

And all retirement lending – including secured and unsecured debt such as mortgages, credit and store cards, overdrafts, loans, car finance, hire purchase, student and payday loans – is expected to double from £65billion in 2017 to £142billion in 2027.

Demand

The analysis was carried out by the Centre for Economics and Business Research and equity release lender More2Life.

Managing director Dave Harris said: “Lending into retirement is becoming the new normal in the UK market.

“Demand among older borrowers will increase significantly over the next decade.

“The market is already responding to increased demand, with record levels of later life mainstream mortgage lending, more

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A survey from Which? found that on average, retired couples needed £18,000 a year to cover household essentials, rising to £26,000 to include leisure activities and holidays.

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“The demographics driving this demand are clear.

“We’re living longer, we’re buying houses later, more and more older people are working past the age of 65 and pension freedoms have enabled people to access, or already spend, retirement funds.

“All of these factors mean borrowing in retirement is going to become a much more prevalent feature of the UK financial services market.” Equity release lending eclipsed the £2billion mark for the first time last year.

However, Robert McCoy, senior product and business manager at TMA Mortgage Club, reckoned the industry needs more big names to grow further.

He said: “Nearly a fifth of the population is over 65.

“This is only going to rise so it’s no surprise that retirement lending is set to more than double in the next 10 years.

“However, more must be done to service this market today.

“Although we’re seeing some lenders introducing new products targeting the over-55s, the lifetime mortgage market is still the domain of specialist lenders and lacks the introduction of a high street name.

Growth

“This is a huge growth sector in the mortgage market. It’s therefore crucial advisers are up to speed on who is offering what.”

The study drew on financial data contained in the Wealth and Assets Survey produced by the Office for National Statistics, as well as the NMG survey produced by the Bank of England.

Forecasts took account of population projections, house price projections and forecasts of the incomes and spending power of retired households.