New research from Scottish Widows Bank(1) reveals one in six (over 1 million),
pensioner homeowners in the UK have an outstanding mortgage on their home – each
with an average debt of £45,313 – making a nationwide debt of almost £47
billion.
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What is more, one in three owe more than £50,000 and one in ten more than
£100,000 putting increased pressure on retirement income. Murdo McHardy, Head of
Product Development and Marketing at Scottish Widows Bank says: “Our research
shows that by the time they come to retire a significant number of pensioners
still have a mortgage outstanding on their property, adding pressure to their
hard earned retirement fund.”
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The study also shows that many pre-retirees (aged 55 to 65) are a long way from
owning their own home – suggesting that the trend of retirees still being
burdened by monthly mortgage repayments is likely to continue. Of those in this
age bracket who are working full time over half (51%) still have a mortgage with
an average debt of £61,856.
;
The size of outstanding debt that pre-retirees have appears to be linked to the
amount of income they receive. Findings reveal that four in ten baby boomers
(those aged 55- 65) who have an annual income over £40,000 still have a
mortgage, compared to only 18 per cent of those with an annual income of less
than £20,000. Over half of people (56%) with an income over £40,000 have more
than £50,000 debt outstanding, twice as many as those with an income of less
than £20,000, where only one in five have more than £50,000 debt outstanding.
;
Murdo McHardy continues: “It is of course a little surprising that people who
have a higher income also tend to have larger liabilities. But it is important
for those people who will be reaching retirement in the next few years, and
still have debt outstanding on their mortgage, to consider how best to prepare
themselves for the eventuality of having to juggle their debts on a reduced
income when they stop working.
;
“With more and more people taking out mortgages later, and paying them off
later, we are seeing many people turning to the equity in their home as a method
of providing income in retirement(2). The knock on effect of getting on the
housing ladder later is that money that could have been put into a pension is
being used on monthly mortgage payments. This trend is only going to continue to
grow for as long as first time buyers struggle to get onto the housing ladder
before the age of 35.”
;
1: Research conducted online by YouGov from August 2005. 1472 people aged above
55 were interviewed. Office of National Statistics shows 74% of those aged 65 to
74 own their own home with or without a mortgage – and 62% of those over 74 do.
Those aged 65 to 74 = 4,935,000
Those aged 75 and above = 4,535,000
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Source Govt Actuarial Dept
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16% of pensioners still have a mortgage outstanding or 1.76 million
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Therefore
4,935,000 x 74% x 16% = 584,304
4,535,000 x 62% x 16% = 449,872
This means we have 1,034,176 pensioner homeowners still with a mortgage
Average debt of £45,313
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72% have a debt between £1 and £50,000 (assume average of £25,000)
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15% have a debt between £50,000 and £100,000 (assume average of £75,000)
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8% have a debt between £100,000 and £200,000 (assume average of £150,000)
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1% have a debt between £200,000 and £250,000 (assume average of £225,000)
(72 x 25,000) + (15 x 75,000) + (8 x 150,000) + (1 x 225,000) = 4,350,000
4,350,000/96 = £45,313
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Making a total debt of £79.75 billion.
Average debt of those in the 55-65 age bracket who are still working
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55% have a debt between £1 and £50,000 (assume average of £25,000)
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27% have a debt between £50,000 and £100,000 (assume average of £75,000)
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11% have a debt between £100,000 and £200,000 (assume average of £150,000)
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3% have a debt between £200,000 and £250,000 (assume average of £225,000)
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1% have a debt between £250,000 and £300,000 (assume average of £275,000)
(55 x 25,000) + (27 x 75,000) + (11 x 150,000) + (3 x 225,000) + (1 x 275,000) =
6,000,000
6,000,000/97 = £61,856
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2: Lending in the final quarter was worth £282 million, compared to £273 million
in the preceding three months. In the second half of the year, when the market
is usually stronger, equity release lending was 13% higher than in the first six
months, at £556 million – CML stats from February 2006
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For further information, please contact
Murdo McHardy Katie Hayward
Head of Product Development and Marketing Lansons Communications
Scottish Widows Bank Tel. 020 7294 /3631
Tel. 0131 655 6818
katieh@lansons.com
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