The pensioner debt index recently produced by the Equity Release Council revealed that unsecured debt among retired homeowners is rising. A 16 per cent annual spike has caused the average indebted homeowner aged over 65 to owe more than £1,500.
However, as can be the case with statistics and data analysis, there is more to the story. The reality of the ERC’s figures is that many retired homeowners are pulling themselves out of debt, with falls in both credit card debt and overdraft use.
But those in serious debt are finding it harder to escape and the financial strain of retirement is being felt by thousands. Unsecured debt is being used as a short-term solution to what is a long-term problem: the rising cost of living.
But as the index shows, the typical homeowner aged over 65 could potentially access around £50,000 of equity – money that could ease the strain felt by those in debt.
Furthermore, this figure of £50,000 is about twice the size of the average pension pot, meaning it is likely that more and more people will turn to their housing wealth to assist them in retirement.
Finally, for those who feel trapped by the smothering effects of unsecured debt, the appeal of equity release will increase as more people see the benefits of tapping into housing wealth.
But as always, there are pros and cons, and secured debt needs to be explained in full along with consideration of all the options for each client.
Therefore qualified, specialised advice is imperative.