Pensioners struggling with debts

Around 31 per cent of homeowners who took out an equity release plan during the first quarter of 2011 used some or all of the money they raised to clear a mortgage, credit card or loan debt, with people owing an average £25,418, according to equity release specialist Key Retirement Solutions.

People owed an average of £30,838 on mortgages, £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 rises in 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.

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 took out to cover it.

The number of retired people unlocking money tied up in their home to repay debt has soared to 31 per cent in the first three months of the year, from 23 per cent during the final quarter of 2010.