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Older homeowners have £10,000+ in credit card debt and are using equity release to repay debts

Up to half of older homeowners in the UK are turning to equity release to repay their debts as they are struggling to keep up with payments.

New analysis from independent equity release adviser Key found that of people aged 55 or above, 30% are using equity release to repay unsecured debt, while 20% are using it to repay mortgages.

The research also found that customers over 55 owe an average of £10,319 on credit cards and £13,578 on loans.

Bev Budsworth, MD of The Debt Advisor said: “Getting sensible advice on a strategy to clear debt is vital. Creditors will generally take a more considered view for individuals post retirement age and will consider partial settlements, full and final IVA’s offering lump sums.

“Our ability to cope with any form of stress deteriorates as we get older and living with unaffordable debt will materially affect your health”.

It is estimated that older borrowers are paying off an average of £300 a month on credit cards, £282 on loans and £586 in mortgage repayments.

Carrying debt into retirement

A significant impact of carrying debt into retirement is the cost of regular repayments which take a substantial bite out of a fixed monthly income.

Over 55s with credit card debt need to use an average of 40% of the state pension (around £730 per month) on repayments before they can meet their other regular costs such as housing, utilities and general living expenses.

Will Hale, CEO at Key, added: “Juggling debt at any age can be stressful but with typically a fixed income, older people are likely to find it even more stressful than most. Clearly people in their 70s and 80s are having to balance how to keep up these repayments alongside maintaining their standard of living in retirement.

“For homeowners, it makes sense to look at downsizing, equity release or other later life lending options to clear their debts and set them up for a more comfortable and less stressful retirement. Good independent expert advice is key to ensuring that older homeowners receive the most benefit from their property wealth and use it in the most appropriate way for them and their families.”

What is equity release?

If you have a mortgage, equity release offers a way to unlock the value of your property and turn it into a lump cash sum.

You can do this via a number of schemes which allow you to access and release the equity tied up in your home, if you’re over the age of 55.

Generally, you can take the money in one lump sum, in several smaller amounts on which you’ll pay interest, or as a combination of both.

You also don’t need to have fully paid off your mortgage to qualify for equity release. You can offer a lump sum raised through equity release to settle your debt via a full and final IVA or a partial settlement plan.

Equity release is not something which should be taken on lightly; you will have to pay arrangement fees, the interest rates are significantly higher than for standard mortgages, and if you calculate it wrong, it can prove very expensive.

Equity release options

There are two equity release options:

1. Lifetime mortgage

  • In a lifetime mortgage equity release, you borrow some of your home’s value at a fixed or capped interest rate
  • This allows you to retain ownership of the property
  • You can choose to ring-fence some of the value of your property as an inheritance for your family
  • You can choose to make repayments or let the interest roll-up
  • The loan amount and any accrued interest is paid back when you die or when you move into long-term care
  • You need to be aged 55+ for this option
  • This is the most popular equity release option.

2. Home reversion

  • In home reversion equity release, you sell all or part of your property to a home reversion provider in return for a lump sum of money or regular payments
  • You then have the right to live in the property – rent free – until you die, although you still have to agree to maintain and insure it
  • You can then ring-fence a percentage of your property for later use, such as inheritance for your family
  • At the end of the plan your property is sold and the sale proceeds are shared according to the percentage you own and the lender owns
  • That means if your property value rises significantly, so does the amount it gets
  • You need to be aged 65+ for this option.

Over 55 and struggling with debt? We can help

The Debt Advisor has been in existence for 19 years and we have gained a reputation as the “go to” practice for debt advice and debt solutions.

We are one of the few practices in England authorised by the Financial Conduct Authority to offer debt management plans.

If you contact us, one of our debt advisors will speak to you about your personal circumstances, your monthly budget, and explain all your options so you can decide which debt solution works best for you.

We may be able to help you with debts, including:

  • Credit Cards
  • Payday Loans
  • Council Tax Arrears
  • Store Cards
  • Personal Loans
  • Overdrafts
  • Utility Bills
  • CCJ Debts

There are a number of debt solutions available, including IVADebt ManagementDebt Relief Order and Bankruptcy.

There may be more than one solution that is suitable for you. We will run through the pros and cons of all debt solutions.

Get Debt Advice Today

For full debt advice and whether any of our available debt solutions would be the best option for you to get out of debt, you can speak to one of our advisors directly on 0800 085 1825 or arrange a callback.

The Debt Advisor Ltd is regulated by The Financial Conduct Authority. This means we are able to offer debt advice and deliver both formal and informal solutions. All debt solutions need to be carefully considered and you must take independent debt advice. We hope that the information and debt advice on this site including Frequently Asked Questions, will help inform you.

There are sources of free debt advice and services. You can find out more by contacting the Money Advice Service on 0800 138 7777 or by visiting their website.

Older homeowners have £10,000+ in credit card debt and are using equity release to repay debts
Older homeowners have £10,000+ in credit card debt and are using equity release to repay debts

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