According to research by equity release provider more 2 life, the retirement lending market will grow by 120% to reach £142bn from its current £65bn level.
The study predicts total debt to over-65s will pass £100bn by 2023, and 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 to £22,700.
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.
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.”
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.”
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, the research found. The 65-74 year old age group has also overtaken under 25s when it comes to average mortgage debt as home ownership has declined for younger buyers.
The research was conducted in partnership with the Centre for Economics and Business Research (Cebr) between January and March 2017. It drew on 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.
“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 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,” added Harris.