Later life lending market set to double in size over next decade

The later life lending market is set to almost double in size over the next decade, new research from the Centre for Economics and Business Research (Cebr) commissioned by equity release lender more 2 life has revealed.

By the end of 2019, lending is expected to reach £295bn – rising to more than half a trillion (£548bn) by 2019. In 2014, over-55s owed £200bn and are predicted to hit £397bn by 2024 – a 98% increase over a 10-year period.

A combination of factors is likely to be driving the growth in amount of later life lending including the increase in older households, rising house prices results in higher mortgage values, and consumers who are increasingly comfortable using unsecured credit.

Analysis also suggests that the 65-74s have the second lowest amount of net yearly savings at £3,100 after expenditure and income has been taken into account. This is just over 60% lower than those aged 50-64 (£8,100) and only slightly higher than those under 30 (£3,050).

Other results from the research showed that 14% of over-55s surveyed have a mortgage on their property; 68% of these individuals report having a repayment mortgage, compared to 23% with an interest-only mortgage. Homeowners aged 65-74 who are still paying off a mortgage owe an average of £120,000. This is higher than the average for 55 to 64 year olds currently repaying a mortgage (£113,000). Those aged 75-84 who are paying off a mortgage owe £78,000 on average.

more 2 life CEO Dave Harris commented: “With more people buying their first homes later in life and the increasing use of unsecured debt, we are finding that more people are entering retirement still committed to ongoing repayments.  While this might be something that can be managed while someone is working, it is harder to sustain when you are on a fixed income. We expect to see this trend continuing and by 2029, over-55s will hold £548 billion worth of debt. Not only are we seeing debt levels increase, but 65-74 year olds have just £3,100 left at the end of the year to save, invest or use to meet any unexpected expenses or manage additional costs.  This is a worryingly small safety net and suggests that managing debt in later life may well become the norm for some people.

“One potential solution to this – and other issues facing over-55s who are trying to make their incomes last for increasingly longer retirements – is to consider how their housing equity can help.  Later Life lenders have stepped up to this challenge and we are seeing increased flexibility as well as a wider choice of products designed to cater for today’s retirement lending market.  However, we must ensure that we do not become complacent and with growing numbers of consumers interested in how they can access their housing equity, it is up to us to lend a helping hand to ensure they are able to enjoy the retirement they deserve.”

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