Huge spike in retirees with mortgage arrears

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The number of people over the age of 60 falling behind on mortgage repayments is climbing. According to figures from the Consumer Credit Counselling Service, the number getting into so much trouble that they seek help has jumped 44% in two years. This makes retirees the group with by far the fastest-growing problem.

So why is this, and what can you do if you're struggling to pay the mortgage?

Huge spike

Almost 6,000 people over the age of 60 contacted the CCCS for help with their debts in 2011 - of which one in five had mortgage arrears. The average person was £4,375 behind on their payments - which is an increase of almost £1,000 in two years. They were also an average of six and a half months behind.


A major part of the problem is the sheer level of debt that people are taking into retirement. According to MGM Advantage, the average retired person has £8,180 of personal debt. Around 178,000 retired people each owe £100,000 or more, and only 57% of the retired population has no personal debt.

This was always going to be the natural consequence of a society where debt is the norm. When your salary won't quite cover your overdraft and credit card bill, you're never going to get a chance to catch up, and you will enter retirement firmly on the back foot.

To add to the concerns of older people, their incomes are increasingly being squeezed. For recent retirees, the appalling annuity rates mean that incomes are likely to be far lower than they ever anticipated.

For those who retired a few years ago, the enemy is inflation. According to Saga, since the financial crisis started (when Northern Rock failed) prices for pensioners have risen by over 20%. Often their income remains static and doesn't keep pace with inflation, while the cost of everything soars - leaving them with a gaping hole in their household budget.

Delroy Corinaldi, CCCS director of external affairs, said this was a worrying trend for the future. "This is a trend which we will need to monitor closely. It is particularly worrying given the current low interest rates," he said: "With many older people taking higher levels of debt with them into retirement, this could be the start of a long-term trend towards far higher levels of mortgage difficulty in later life."

So what can you do?

You need to take action as soon as possible. The first step is to get some free debt advice from the experts. Coranaldi adds: "Family members have a key role to play. If a parent or grandparent is struggling to cope with their mortgage costs or other debts, the best thing to do is to help them seek free advice from a debt charity as early as possible."

The charity may be able to talk to your lender, renegotiate your payments to something more affordable, or freeze charges and interest on the arrears to give you a chance to catch up. However, once the initial crisis has passed, it's essential you stick to any repayment plan you have agreed. If you fall short on a renegotiated deal, your lender will be less sympathetic.

And in order to make all this possible, you need to assess your whole financial situation. Many people will have done the easy things like seeing if they can reduce the cost of utilities or the weekly shop. They may also have cut out things like luxuries and holidays. However, at this stage bigger changes are worth considering too, like downsizing, moving to a cheaper area, taking in lodgers, or returning to work to pay the bills.

It's also worth having a look at our guide to avoiding repossession.

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Huge spike in retirees with mortgage arrears

Figures from charity Age UK show that 29% of those over 60 feel uncertain or negative about their current financial situation - with millions facing poverty and hardship.

Even though saving for retirement is not much fun, the message is therefore that having to rely on dwindling state benefits in retirement is even less so.

To avoid ending up in this situation, adviser Hargreaves Lansdown recommends saving a proportion of your salary equal to half your age at the time of starting a pension.

In other words, if you are 30 when you start a pension, you should put in 15% throughout your working life. If you start at 24, saving 12% of your salary a year should produce a similar return.


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