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News: Mortgage debt time-bomb for pensioners

Mon, 02 Apr 07

According to a recent poll by Key Retirement Solutions, a quarter of people in or nearing retirement have mortgage debts worth thousands of pounds...

The analysis, based on more than 4620 over 60s who released equity in their home in 2006, found that the average debt was £31000.  Over 70s owed an average of around £37100 pounds to their mortgage lender - the highest level of mortgage debt.  That compares to £29300 among those aged 65 - 69, and £23500 pounds among those aged 60 - 64.

Dean Mirfin, business development director at Key Retirement Solutions believes that the problem is set to worsen for future generations. "We are seeing increasing numbers of over-60s coming to us with mortgage debt that they are struggling to manage and looking for a way to ease the burden of debt in retirement”

Mirfin continued: "With the rising trend in higher levels of borrowing, and fewer people saving for retirement, this could be a time-bomb waiting to hit the next few generations of pensioners even harder than we're seeing now.

“Whilst this analysis is based upon those who have released equity from their home, if these are only in part reflective of pensioners as a whole, it has to be of huge concern to us all."

Things only likely to get worse

Chris Tapp, associate director of charity Credit Action, said the findings highlighted the "very difficult situation a sizable number of pensioners find themselves in when trying to cope with debt repayments as well as rising living costs”.

Tapp added: "We are also concerned that this is a trend which is only likely to get worse as we see people borrowing more, borrowing for longer and saving less in a desperate attempt to get a foot onto the housing ladder".

Recent Credit Action statistics show that 1.4 million pensioners live on an annual income of £5000 pounds or less. After council tax and utility bills are paid, this leaves just £257 per month.  Servicing outstanding mortgage debt costs an average of £215 per month -- leaving the most vulnerable with a paltry £42 to live on.

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