According to a new report released, one in three pensioners opts to release some of the cash tied up in their property due to mounting debts.
Key Retirement Solutions have said that approximately 31% of customers entering into an equity release scheme in the first three months of 2011 chose to do so to provide funds to pay off debts on either a loan, credit card or mortgage.
The research showed that the typical level of debt was £25,418 but some individuals had extortionate levels of debt with £340,000 outstanding on mortgages, £90,000 due to be paid off on credit cards and loan balances of £250,000. However, the average levels of debt seen was around £10,296 on credit cards, £30,838 on mortgages and £11,836 on their outstanding loans.
With the average income in a pensioner’s household around £18,000 per annum, it comes as little surprise that many were struggling to repay the debts, with the typical monthly payments due totalling £385. Many said that the debts had accumulated as they looked for alternative ways to pay for essentials, as the rising cost of living meant their pension was no longer stretching far enough.
The study was based upon 4400 customers and demonstrated 31% of pensioners were deciding to use cash tied up in their property in the first quarter of 2011, compared to just 23% in the last three months of 2010.
The Group Director at Key Retirement Solutions, Dean Mirfin, said that pensioners had been badly affected by the endowment mis-selling scandal in the past, leaving balances much greater than originally predicted on their mortgages. This fact coupled with the difficulty in getting credit meant that older home-owners were increasingly looking to use their ‘considerable wealth’ that was previously inaccessible to them.