UK over-55s are expected to borrow £19bn less over the next two years as a result of the COVID-19 pandemic, according to new research from equity release lender, more2life, and economics consultancy, Cebr.

The research indicated the reduction is expected to be due to older generations being more cautious amid the current economic uncertainty, with expected cuts on spending on big ticket items such as cars, delaying moving home and avoiding unnecessary spending.

As a result, more2life stated the total amount of debt held by the over-55s is forecast to fall from £226bn in 2019, to £211bn this year, and then to £207bn in 2021.

However, as the economy recovers and consumer appetite for borrowing returns, more2life’s research forecast that borrowing levels will rise after 2021, ultimately reaching £300bn by 2030. This would see the total amount of debt owed by the over-55s increase by almost half (42%) in just ten years, when compared to 2020 (£211bn).

more2life suggested the drop in forecasted debt can be attributed to falling consumer confidence as well as a dramatic shift in household spending since the start of lockdown – with nearly all households spending less than in pre-pandemic times.

“The coronavirus pandemic is having a huge impact on the way over-55s spend their money,” more2life CEO, Dave Harris, commented. “The nationwide lockdown, coupled with the heightened economic uncertainty, has caused many retirees to become more cautious and rein in their spending on larger or discretionary goods.

“However, although we are expecting to see a short-term fall in borrowing by the over-55s, it is clear that this will not be a lasting trend.

“Almost a third of this demographic will experience a hit on their finances and are expecting their debt to rise as a direct result of the pandemic. For those who are impacted financially and need to draw on extra funds, it is crucial that they are made aware of the solutions that can help them bridge this income gap.”

more2life’s research also revealed that households aged between 55 and 64 are expected to owe £94,173, including mortgage repayments, in 2021 – compared to £106,552 in 2019 on average.

Households aged 75 and over who still hold mortgage debt will also see their total debt level fall from £67,007 in 2019, to £58,975 by 2021.

“As debt among older generations rises, it will be vital that they understand how housing equity can help navigate and manage their various financial obligations in retirement,” Harris added.

“The variety of products now on offer in the later life lending market means that consumers with varying needs are able to find the right option that is suited to their circumstances and ensure that they are able to enjoy a more comfortable retirement.”

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