Mortgages  

Loans for retirees set to double in 10 years

Loans for retirees set to double in 10 years

Lending to retirees is set to become normalised over the next decade, according to equity release lender More 2 Life.

The assertion is backed by research that calculates the average total debt of every 65-74 year old in the UK will rise from £12,500 currently to £22,700 in 10 years’ time.

The research was undertaken by More 2 Life in partnership with the Centre for Economics and Business Research between January and March 2017.

The projections cover expected growth in all types of secured and unsecured debt including mortgages, credit cards, overdrafts, loans, car finance, hire purchase, student loans, payday loans and store cards.

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

Dave Harris, managing director at More 2 Life, predicted that lending to retirees would increasingly become normalised and that the market for such loans would grow from £65bn in 2017 to more than £142bn in 2027.  

“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 pensions freedoms have enabled people to access (and in some cases, already spend!) their retirement funds," he said. 

"All of these factors means that borrowing in retirement is going to become a much more prevalent feature of the UK financial services market.”

Harris pointed out that the research found the average mortgage debt of 65-74 year olds has overtaken under 25s, as home ownership has declined for this age group. 

He said there would be an increasing number of homeowners entering retirement with outstanding mortgage balances and that More 2 Life would be looking to create new lending solutions in the lifetime mortgage space as well as other types of loans.

Paul White, consultant at Belgravia Insurance Consultants, said too many lenders still had age 65 limits on loans and that the market need to evolve.

"People who are entering the workforce now probaby will not retire until 68 or much later, so innovation among lenders is a long overdue updating of the facts of life," he said.