Over-55s used housing equity to clear more than £612m of unsecured debt in 2020, according to new data published by Key.

The equity release adviser’s analysis revealed that on average, credit cards (£8,500), overdrafts (£2,000) and loan balances (£11,700) were most commonly repaid, as people looked to manage their retirement income by reducing outgoings.

Around a fifth (18%) of the £3.4bn property wealth released in 2020 was used to clear unsecured debts, with older customers of all ages facing debt issues. Key also revealed that around 14% of customers had credit card balances, while 12% had loans to pay off and 6% needed to pay off car finance

The data showed customers with credit card debts were making monthly repayments of around £292 while loan repayments added up to £267 a month on average. Even overdrafts cost nearly £18 a month on average.

With the full basic State Pension amounting to £179.60 a week or £9,339.20 a year from April, the equity release adviser suggested that struggling over-55s would lose more than 70% of their state support just meeting minimum repayments.

“Unsecured debt is a major issue for people of all ages and our data shows that it affects those in their 70s and 80s as well much as younger people,” commented Key CEO, Will Hale. “Nobody wants to retire in debt but sometimes it is unavoidable.

“The problem is that people on fixed incomes will struggle to clear debts and often end up paying the minimum amount each month which inevitably means it takes longer to pay the debt off as interest mounts up. For those who rely heavily on the state pension, losing 70% of this state support just meeting these minimum repayments must be devastating.

“Those who are struggling with debt need to look for support as there are options available. For some this might mean refinance debt using a more modern and flexible approach. Equity release plans enabling people to make repayments on interest and capital are increasingly playing a major role and can help people who are struggling.” 

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