Nearly a third of pensioners who unlock money tied up in their property are struggling with debts of more than £25,000. Nearly a third of pensioners who choose to release equity from their property do so because they are struggling with debts of more than £25,000, according to a report by Key Retirement Solutions.
Around 31pc of home owners who took out an equity release plan during the first quarter of this year used some or all of the money they raised to clear a mortgage, credit card or loan debt. People owed an average of £25,418, according to the equity release specialist.
People owed an average of £30,838 on their mortgage, £10,296 on credit cards and £11,386 on loans, although not everybody had sums outstanding on all three types of debt.
The group said in extreme cases it had come across pensioners who owed £90,000 on credit cards, while others had unsecured loans totalling £250,000 and mortgages of £340,000.
It blamed the high level of credit card debt that some people had run up on the combination of the credit crunch and hikes to the cost of living, saying many pensioners may have been forced to use the cards to fund day-to-day expenses, as they were unable to borrow money in other ways.
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High levels of outstanding mortgage debt may also be due to the endowment mis-selling scandal, which left many people with a shortfall between the amount they owed on their home loan and the maturity value of the investment they had taken out to cover it.
The number of retired people unlocking money tied up in their home to repay debt has increased to 31pc in the first three months of the year, from 23pc during the final quarter of 2010.
The group, which analysed 4,400 customers, found people were spending an average of £385 a month on debt repayments in 2010 – the equivalent of a quarter of the typical pensioner household's income of less than £18,000.
Dean Mirfin, group director at Key Retirement Solutions, said: "Pensioners in line with the rest of the country have struggled to borrow money in the past three years and have increasingly turned to credit cards to tide them over.
"They are also feeling the effects of the endowment mis-selling scandal as they're coming to the end of mortgage terms and struggling to pay off mortgages as their endowments have missed payout forecasts.
"It all adds up to a major squeeze on incomes but there is silver lining in that they are literally sitting on considerable wealth in their own home."
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