Quarter of pensioners still paying mortgage

More than a quarter of retired people are still paying off a mortgage, while over 50% have mortgage and/or other personal debt in the form of loans, credit cards and overdrafts.

The average pensioner taking out an equity release policy to free up some of the cash tied up in their home has debts of £35,991, according to research from Key Retirement Solutions.

It calculates paying off debts costs the average pensioner £297 a month, which equates to almost 30% of the typical annual retiree post-tax income of £12,412 a year.

The over 80s have even more debt than their sixty-something counterparts, with an average £40,958 outstanding, compared to £29,314.

Mortgages make up the biggest slice of the debt with 27% of pensioners still owing money on their homes.

This in part reflects an increasing number of today's pensioners are living with a mortgage into retirement following an endowment or other investment shortfall. The situation is predicted to worsen as many endowments are due to mature with considerable shortfalls in the coming years.

The average still owed by the over 65's on mortgages is £35,441 rising to £52,576 for the over-70's while the average credit card debt is £8,881 rising to £9,048 for the over-70's.

Dean Mirfin, KRS group director, says: "Property wealth has enabled the over-65's in common with the rest of the population to comfortably afford to borrow.

"Servicing debt cannot continue to be a way of life once you no longer have an income to enable you to comfortably make repayments and clearly many pensioners will struggle to juggle loans, credit cards, overdrafts and mortgages.

"The over-65s are in many cases literally sitting on considerable wealth in the shape of their home and clearing debt can have a dramatic effect on their monthly outgoings and provide a welcome boost to their income.

"The level of mortgage debt being carried into retirement is very worrying and with no expected change in this trend pensioners no doubt will further need to look at solutions like equity release to provide the retirement they had hoped for."