New research from equity release lender More 2 Life has found that the size of the retirement lending market in the UK is set to rise from £65bn in 2017 to more than £142bn in 2027, an increase of over 120%.
The research predicts that total debt among the over-65s will pass the £100bn mark by 2023 and that the average total debt of every 65-74 year old in the UK will rise by £10,000 between 2017 and 2027, from £12,500 currently to £22,700 in 10 years’ time.
The retirement lending market includes all types of secured and unsecured debt including mortgages, credit cards, overdrafts, loans, car finance, hire purchase, student loans, payday loans, and store cards.
The research was conducted in partnership with the Centre for Economics and Business Research (Cebr) between January and March 2017. The research drew on detailed financial data contained in the Wealth and Assets Survey produced by the Office for National Statistics, as well as the ‘NMG survey’ produced by the Bank of England. Forecasts took account of population projections, Cebr house price projections and forecasts of the incomes and spending power of retired households.
Dave Harris, managing director at More 2 Life, said: “Lending into retirement is becoming the new normal in the UK market, and demand among older borrowers is going to increase significantly over the next decade. The market is already responding to increased demand, with record levels of later life mainstream mortgage lending, more innovation in the equity release sector (which passed the £2bn mark for the first time last year) and a greater understanding of what older borrowers need in terms of products and advice.
“The demographics driving this demand are clear – we’re living longer, we’re buying houses later, more and more older people are working past the age of 65 and pensions freedoms have enabled people to access (and in some cases, already spend!) their retirement funds. All of these factors means that borrowing in retirement is going to become a much more prevalent feature of the UK financial services market.”
The research also found that the average 65-74 year old in the UK with a mortgage currently owes about £125,000 – more than the average 55-64 year old, who owes £109,000 in mortgage debt.
Also, about 9% of 65-74 year old homeowners, and 4% of over 75 homeowners, are still repaying a mortgage. The average mortgage debt of 65-74 year olds has overtaken under 25s, as homeownership has declined for this age group
Harris added: “An increasing number of homeowners are entering retirement with outstanding mortgage balances. For these customers – and particularly those on interest-only mortgages without an alternative capital repayment strategy – retirement lending and particularly lifetime mortgages are a financial lifeline.
“For all lenders and product providers in the lifetime mortgage market, this changing demographic provides a great opportunity for growth. As one of the leading providers of retirement lending solutions, More 2 Life is committed to innovation and we are constantly working on new solutions for this market to help meet the wide range of client needs, not just within the lifetime mortgage space, but also across retirement lending as a whole.”