A growing number of pensioners are taking out equity release plans to pay off their outstanding mortgage debt, Key Retirement Solutions has found.
According to Key Retirement Solutions' analysis, in 2008 38.72 per cent more of its equity release customers approached it for the purpose of repaying their mortgage last year compared to 2007.
One in three UK pensioners has an outstanding mortgage, amounting to a total of £140billion of debt, at an average £43,069 per pensioner, so more are releasing cash from their home to clear their debts.
Key Retirement Solutions explains that the reason so many pensioners have outstanding mortgage debt when they retire could be due to the failure of a previous investment, such as an endowment, which failed to meet the repayment balance of the mortgage as expected.
Another reason could be a past necessity to take out a mortgage with a repayment term which extends into their retirement, which can be difficult to keep up with if income falls considerably after retirement.
Dean Mirfin, group director at Key Retirement Solutions, said that while it is expected that some people will still have an outstanding mortgage when they retire, he is concerned about the potential scale of mortgage debt amongst pensioners.
If Key Retirement Solutions' figures are at all reflective of the wider market, he said, "today's and tomorrow's pensioners face a retirement in a position of debt which they had maybe not anticipated."
He added: "It does not therefore come as a surprise that many of those faced with this scenario are looking to equity release as a solution to eradicate their mortgage debt to free up much needed income to further enhance their retirement years."
Mr Mirfin calls on the Chancellor, Alistair Darling, to announce plans in his Budget later this week which will help alleviate the burden which many pensioners face.
Commenting on Key Retirement Solutions' findings, Chris Tapp, director of charity Credit Action, said that they demonstrate how the economic life-cycle has changed, with fewer people being debt free by retirement.
"This debt dependency is hugely concerning and something we as a society need to urgently address," he urges. "For those millions already struggling with mortgages and other debts in retirement it is essential that they seek out good advice on the solutions available to them, such as equity release."
Equity release can help boost retirement income by unlocking cash from your home, but it's not right for everyone – get equity release advice and see if it's right for you.
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