Over-55s expected to borrow £19bn less due to 'corona caution'

The study found that this reduction is due to the older generation being more cautious amid the current economic uncertainty and cutting spending on big ticket items, delaying moving home and avoiding unnecessary spending. As a result, the total amount of debt held by the over-55s is forecast to fall from £226bn in 2019 to £211bn in 2020 and £207bn by 2021.

Households aged 55-64 are expected to owe £94,173, including mortgage repayments, in 2021 compared to £106,552 in 2019 on average. Households aged 75 and over who still hold mortgage debt will also see their total debt level fall from £67,007 in 2019 to £58,975 by 2021.

Recent data from Moneyfacts has revealed that nine in 10 (89%) people who are saving for retirement or currently retired saw the value of their pension pot fall by an average of 15.2% in the first quarter of 2020 – the worst quarterly performance on record. Furthermore, 30% of those aged 60-64 who are still working are now earning less than they did prior to the outbreak.

Nearly a third (30%) of respondents aged 54 and over think that the pandemic will impact them financially and increase the amount of debt they have. This was particularly prevalent among those still working, with 33% of respondents in full-time employment and 40% in a part-time job believing the outbreak would raise their debt levels.

However, as the economy recovers and consumer appetite for borrowing returns, more2life predicts that borrowing levels will rise after 2021, increasing by almost half to £300bn by 2030.

Dave Harris, CEO of more2life, commented: “The coronavirus pandemic is having a huge impact on the way over-55s spend their money. The nationwide lockdown, coupled with the heightened economic uncertainty, has caused many retirees to become more cautious and rein in their spending on larger or discretionary goods. However, although we are expecting to see a short-term fall in borrowing by the over-55s, it is clear that this will not be a lasting trend.

“Almost a third of this demographic will experience a hit on their finances and are expecting their debt to rise as a direct result of the pandemic. For those who are impacted financially and need to draw on extra funds, it is crucial that they are made aware of the solutions that can help them bridge this income gap.

“As debt among older generations rises, it will be vital that they understand how housing equity can help navigate and manage their various financial obligations in retirement. The variety of products now on offer in the later life lending market means that consumers with varying needs are able to find the right option that is suited to their circumstances and ensure that they are able to enjoy a more comfortable retirement.”

Diane Watson, founder of She Can Prosper, added: “The coronavirus pandemic has had a huge impact on our society, but the true economic consequences of the crisis are only now beginning to be felt. Whilst today’s research shows a short-term fall in debt among the over-55s, many people in this demographic will see the value of their pension savings fall which will have a massive effect on their financial wellbeing.

“Indeed, with debt levels among retirees forecasted to reach £300bn within 10 years, it’s clear that these individuals will increasingly need to turn to the borrowing options available to help boost their retirement income. Today’s retirees face greater financial pressures and longer life spans than the generations that came before them, making it vital for them to plan for later life adequately so that they can enjoy the retirement they deserve.”