Total debt held by over-55s up by almost 20% in five years
Recent research carried out by Later Life Lender more2life and economics consultancy Cebr has revealed that that the total amount of debt owed by the over-55s will rise to £294bn this year, up from £272bn in 2021 and £209bn in 2017. This is a leap of two fifths (41%) in five years and the total is set to soar even further over the next decade, to £402bn by 2032. This is a significant rise of 92% in just 15 years.
Over 55s are not the only demographic to be pushed towards credit and loan options following the increases in the cost of living and rising bills.
55 to 64-year-olds bear the brunt of later life debt
Most of this debt is held by younger retirees aged 55 to 64 who are typically still working while repaying mortgages and supporting children. Total debt held by this group is expected to rise from £196bn last year to £210bn in 2022. Indeed, half (50%) of 55 to 64-year-olds say that they are currently in debt or have been in the past five years, equating to 4.4m people.
Unsecured debt to rise by over a third this year
Unsecured debt amongst the over-55s grew rapidly from less than £20bn in 2015 to over £25bn in 2019 but contracted slightly over 2020-2021 as spending reduced during the pandemic. However, unsecured debt is expected to rise by over a third (34%) in 2022, reaching £20bn, as the cost-of-living drives many to borrow to make ends meet. Currently, almost 40% of retirees have spent more than they receive in income in some months in 2022 (with 8% saying this often or always happens), which will likely only rise further as this debt level increases.
Again, those aged 55-64 are most likely to have larger unsecured debt levels in 2022, with the average credit card debt of those with debt standing at £2,800. Other types of unsecured debt levels are expected to average £10,700 per individual with debt. Higher interest rates are unlikely to deter this rise in unsecured borrowing in the short term, but by the next decade should see the total amount plateau at £19bn.
Nearly 5 million over-55s struggled with credit card debt in the past five years
More than one in five (22%) over-55s revealed that they had credit card debt in the past five years which they had not paid off in full each month, equating to 4.7m people. The second most common type of debt was an overdraft, with 9% (1.9m people) noting that they had used this solution over the same period.
It’s important to understand that there are options available that could not only support those facing escalating debts but that could also support loved ones as their outgoings rise too. Equity Release is an increasingly flexible and popular product that can help offset the cost-of-living crisis for over 55's, however, it can have drawbacks and may not always offer a solution that will save money in the long-term, so it’s vital that independent advice is secured when considering this product. Our advisers can research all the later life borrowing options available to you based on your circumstances
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Source: more2life
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