Unsecured debt amongst 55-74 year olds is on the rise

Written by Oliver Wade

Equity release lender more 2 life has recently revealed that unsecured debt amongst 55 to 74 year olds has risen by more than a third over the past four years, which is twice as fast the national average.

While 34% of over 55s have a form of unsecured debt, it is the younger cohort (those aged 55 to 64) who are 48% more likely to have this type of borrowing, according to analysis by the Centre for Economics and Business Research (Cebr). However, as people age, the proportion of those with unsecured debt declines, with 30% of 65 to 74 year olds and 15% of 75 to 84 year olds having some form of it.

more 2 life also highlighted that those over-55s who have retired or reduced their working hours and are managing a more fixed income have “alarmingly high” debt to income ratios. The data suggested that credit cards are the form of debt used most frequently by over-55s, with 30% spending more on credit cards than they pay off each month.

The study further found that some over-55s that have held unsecured debt in the last five years have decided to use it to gain loyalty points, such as air miles (5%), or invest in other assets (5%), but the vast majority have used it for necessities. Almost one in five used the unsecured borrowing for home refurbishments or repairs, while 17% used it to repay other borrowing. Just over a fifth of those used it for a large purchase and another 17% used it to cover day to day expenses.

more 2 life CEO Dave Harris said: “Our research clearly highlights the growing use of unsecure borrowing amongst older age groups, with debt rising by more than a third in just four years. While these figures might seem relatively modest and manageable while working full-time, it may well stretch the budget of someone in retirement on a fixed income.

“With continuing issues around insufficient retirement savings and an increasing number of people entering retirement with other types of borrowing like mortgages, the problem is only going to get worse. As an industry, we need to do more to ensure customers are fully aware of all the options available to them, including how they can unlock their property wealth to achieve their goals of a stress-free retirement.

“For advisers, these borrowers represent a segment of the market that requires a significant amount of support. Advisers have a vital role to play in determining whether equity release can help their clients, which creates an opportunity for them to expand their offering. As this research reveals, the issue of growing debt levels among retirees cannot be ignored any longer. It is crucial for lenders and advisers to work together to develop an expansive product range and deliver thorough advice that is in the best interest of customers.”

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