The Equity Release Council (ERC) has released statistics that reveal the amount of unsecured debt held by homeowners over the age of 65 has risen sharply in the last 12 months. The statistics relate to the period between December 2013 and December 2014.
In December 2013 the average amount of unsecured debt per person in this age group was £1,336. This rose by 16% in just 12 months, rising to £1,546 on average in December 2014. These figures were released as part of the ERC’s Pensioner Debt Index report.
The majority of over-65 homeowners are mortgage free
The report found that 79% of homeowners in this age group did not have a mortgage at all and owned their property outright. In addition, the average amount of equity people of this age group have in their property was revealed to be £192,506.
Another sobering figure reported in the Pensioner Debt Index related to the use of credit cards among pensioners. Credit card borrowing has increased significantly over the past year, rising by 29%. Overdrafts are also up, increasing by 47% in the same period.
The clear pattern here is one of retired homeowners using unsecured debt to meet their daily financial requirements. Indeed, 40% of those questioned for the report said they had used a credit card to pay some of their usual household bills. This is in sharp contrast to the significant amount of equity many homeowners in this age bracket have in their homes.
Could these figures drive a further increase in the equity release market?
The latest statistics have shown that the equity release market had a bumper year in 2014. As we have revealed previously, the £1 billion barrier was finally surpassed in September of 2014. There is now much speculation on how far the market could expand in 2015.
Clearly these latest figures from the Equity Release Council seem to confirm that many pensioners are focusing on unsecured debt to help make ends meet. However with a significant amount of money tied up in many retiree’s properties, equity release could be a viable alternative. Not only could it do away with the need for unsecured debt, it may also ensure a more comfortable retirement for many people. Equity release still allows these people to live in their own homes for the rest of their lives. However it ensures they can make use of some of the equity they have worked hard to build up in their properties over the years.
As such we may have reached a time when more and more retirees consider equity release as a potential solution to enable them to afford a better and more secure retirement. With 2015 set to be a good year in this marketplace, it will be interesting to see how next year’s Pensioner Debt Index compares with the recently-released report. There could potentially be some major differences if the suspected changes do indeed occur.