Mortgages Last Into Retirement
Three in ten pensioners are still paying off mortgages, but many have recently release equity from their homes to give them cash to live their lives.
A report has revealed that around three in ten people who own homes over the age of 70 have still not finished paying off their mortgages.
The report was from Key Retirement Solutions, an equity release firm, who interviewed 4,500 people over 55 who had released money from their home in the last year. Typically, people who do owe money on their home still have £45,000 left to pay.
Although the interview sample may sway the figures towards larger numbers than are actually the case, it is evident that many pensioners are not living a relaxed retirement without debt as it is perceived.
Another organisation, the Consumer Credit Counselling Service, said recently that pensioners who had been in touch with them had debts of around £30,000.
Key Retirement Solutions say that in 2007 the average mortgage owed by an older person was £37,113. It is now thought to be £45,493 – an increase of 23%.
Much of this has happened because older people have turned to equity release to turn the value of their home into disposable cash. These equity release schemes have the agreement that upon death, or moving home, the cash plus interest must be repaid. There are a number of critics of the scheme.
Many pensioners are concerned these days that they will not have enough money to last them through their retirement, which causes them to turn to equity release. According to Life Trust Insurance people are worried that their money will run out if they live ‘too long’. Today’s average lifespan is 82 years, but a person aged 50 today has a 50% chance of reaching 90.
If current pensions are seen as inadequate to finance a retirement, then what will happen in the future is anybody’s guess. With more people living longer and less money in pension funds, more equity release looks inevitable.
