Saturday, 26 January 2013

Britain's hard working and thrifty pensioners.

Spotted by Bob E in The Telegraph:

Many still owe hundreds of thousands of pounds on interest-only mortgages, caught between endowments that failed to deliver and lenders demanding repayment.

Those approaching retirement are hitting the milestone in poor financial shape, with nearly one in five expecting to be in debt on the day they receive their gold carriage clock.

Figures from Prudential released this week show that the average owed by [the one-in-five who retires in debt] is more than £31,000, spread over a mixture of credit cards, bank loans, overdrafts and mortgages. Twelve per cent of them do not expect that they will ever clear the debt, while it will eat into the income of others for several years before they pay it off.

The charity StepChange, formerly known as the Consumer Credit Counselling Service, said it had seen a 44pc increase since 2009 in the number of over-sixties contacting it with problems paying their mortgages. "With many older people taking higher levels of debt with them into retirement, this could be the start of a long-term trend," warned Delroy Corinaldi, a director of StepChange.


This is an advertorial for "equity release' schemes of course, but let's take the figures at face value.

From the comments:

alanr: Any pensioner that owes six-figure sums on an IO deal has likely been severely imprudent, rather than unlucky as you imply.

No no no no no Alan, you can't say that! Haven't you realised there is a determined effort underway to establish an "interest only mortgage miss-selling scandal" in order to push for some sort of bail out for all these "unlucky" and certainly not imprudent/stupid/greedy people?

21 comments:

A K Haart said...

Well - calculators are so expensive aren't they?

Mark Wadsworth said...

AKH, but the man at the bank said they didn't need one, just sign here and here and here and in a few years' time they will be rich, rich, rich.

Bayard said...

I remember when all this lending frenzy kicked off, there was a comedy team who took the piss out of the adverts. They all started sounding pukka, then became more and more absurd and all ended with a loud and hollow voice saying "Give us your house!"

Macheath said...

So we're looking at a loans linked to policies which will pay out the full insured amount on the accidental death of one of the borrowers and a newly-retired population with plenty of leisure to study Midsomer Murders, Silent Witness and re-runs of Morse; are you thinking what I'm thinking...?

. said...

The chances are that if you are retiring now you bought your first house thirty years ago when it cost about fifty pence (or two pounds fifty in London). I could refinance that kind of money on a credit card...

BE

adamcollyer said...

The person at the bank said it was what they needed so they bought it. And if it turns out that actually they didn't need it then it's "mis-selling".

Presumably if they want to make a beef stew and they buy chicken for it instead, it will be all Tesco's fault when it doesn't taste right.

Rich Tee said...

Although I am angry about the cost of housing (partly angry for myself for not taking people's advice to buy during the 1990s when homes were very cheap) I do not at least have a horrible debt hanging over me like this. They say there is always somebody in life worse off than you, don't they?

My only debt is my student loan on which I have been deferring repayments for 20-odd years now. If I have understood the terms and conditions correctly even that will get written off if I don't start paying it off within 25 years and I'm approaching that now...

Mark Wadsworth said...

B, that's the general idea. The perfect loan is one which the borrower can never quite pay off.

McH, yes, one of the couple will die of boredom, which solves the problem for the survivor.

BE, correct, the hypocrisy is staggering. That supposed £31,000 debt is far more than the original mortgage and a fraction of their house price gain (albeit on paper).

AC, good analogy.

RT, can you do that? I finished uni in 1996 and started paying straight away (I didn't realise you could defer), it was paid off in five or six years. Admittedly, I took out the low interest loan merely for the fun off putting it in a high interest ISA account (or TESSA, as was), but hey.

Bill Quango MP said...

The only two sensible things i've ever done.

Told the endowment mortgage man that I don't need an investment product..I need a mortgage.

And told the interest only man.. This great deal. I will owe exactly what i borrow in 25 years time? And you think inflation and another of your 'investment' products will see me with more cash than just paying off the loan and keeping the asset? Hmm..lets see...you know where the door is?

Mark Wadsworth said...

BQ, nice one, but why did you ask if he knew where the door was? Had you forgotten where it was?

Graeme said...

it's going to be about equity-release loans now.....it reminds me why I never watch the telly - I am fed up with paxman and peston telling use that things are bad.

Graeme said...

@Bill...when the endowment man called...it was when interest rates were ca 13% and inflation was 7%. In the absence of extortionate indutry charges, the endowment product should have won out over time. I still have a small surplus on the endowments. But if I had invested the endowment premiums myself, I would have been quids-in. Funny old world.

Furor Teutonicus said...

XX Mark Wadsworth said...

RT, can you do that? I finished uni in 1996 and started paying straight away (I didn't realise you could defer), XX

They have been after me for years. If you earn over a certain amount (can not remember how much) you are supposed to pay it back. But as they seem to have terrible problems translating, first Deutschmark, and now Euros, into pounds, they have never been able to come to a reasonable decision as to exactly HOW much I should be paying.

Therefore, I do not pay.

Physiocrat said...

I bought a house in 1983 and there was an attempt to sell me one of those endowment mortgage thingies. I was told I would receive a lump sum of zillions at the end. But when I asked the salesman where these zillions were going to come from he couldn't tell me, so I said that I would have one of the ordinary mortgages instead which I had paid off after ten years.

Rich Tee said...

Re: student loans

I took mine out in 1991 & 1992. They were the first two years and I think the terms and conditions were very preferable in those days because the government wanted to get people to accept them.

I don't have to pay mine off until I earn over £25,000 which has never happened. I would pay by Direct Debit where it is easy to cancel it and "do a runner".

I did start voluntarily paying it off but then I realised that the interest rate was the same as inflation so the debt never increases in real terms so there is no benefit to paying it off early.

And as I said, AFAIK, mine gets cancelled after 25 years as well.

Nowadays AFAIK the interest rate is a commercial rate, the income threshold is much lower and the money is deducted from your salary by your employer. Much worse T&Cs than in my day.

Lola said...

Not that long ago, about three / four years or so, I was at a dinner with various other financial services people. We all had to say whet we did. Bloke next to me stated that he was a 'mortgage adviser' and that his job was to 'make people's dreams come true'. I asked him what would happen when those dreams became nightmares.. He didn't speak to me again the whole evening...

Mark Wadsworth said...

G, if it sounds too good to be true, then it probably is. Especially if a bank salesman is saying it.

FT, are you talking about BAFöG? I know a few people who've done that, by simply bunking off abroad. Which highlights a weakness in the plan.


Ph, yes, paying off mortgages in ten years, those were the good old days. Which only ended about twelve years ago.

RT, so you continue to benefit from the old T&C's? Good stuff. It is YPP policy to waive half of student loans and to collect the rest as normal.

L, has he ever spoken to you since?

Furor Teutonicus said...

XX Mark Wadsworth said...
FT, are you talking about BAFöG? I know a few people who've done that, by simply bunking off abroad. Which highlights a weakness in the plan. XX

No. I was at Edinburgh. The "Student loans company." Or whatever they call themselves now.

They will not accept any payment under 100 Quid a week (About €100). Which is mighty damn fine, but Average pay for my line of work is only around €1,100 per month BEFORE tax! Out of the rest, we are responsible for our own sickness and unemployment insurance, as well as having to make our own arangements with pension companies.

As you may apprieciate, €100 per week is totaly unrealistic.

Lola said...

MW - have never seen him again...

Mark Wadsworth said...

FT, aha, I was confused because you mentioned DM and Euro and so on.

L, good riddance :-)

Lola said...

MW. Mind you, reg-yew-lay-shuns won't sort him because he is 'compliant'. Heaves deep sigh...