Risk of debt: over-55s hit by urge to splurge

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The urge to spend, spend, spend is understandable after constant lockdowns, with millions of people looking to splash out on big-ticket items such as cars, mortgages and home renovations.

The over-55s will take on another £10billion of debt this year, driving their total borrowings to an astonishing £236billion, according to research carried out by the Centre for Economics and Business Research on behalf of equity release lender More2Life.

Yet more than one in four say their financial situation has got worse since the first lockdown in March last year, and the pressure to spend will only add to their money worries.

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Many delayed purchases and tightened their belts last year but now feel under pressure to spend as the economy opens up.

More2life chief executive officer Dave Harris said that many over-55s will struggle as furlough ends and spending returns to normal: “Some are turning to short-term debt such as credit cards, and borrowing could very quickly hit unmanageable levels.”

Britons saved an extra £117billion and paid down £59billion of debt during lockdown, according to research from Virgin Money.

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Now the shackles are coming off as the nation enjoys a splurge, Hargreaves Lansdown personal finance analyst Sarah Coles said: “As recently as April, people were still clearing debts and cutting up credit cards, but this went into reverse after non-essential shops and pub gardens opened.”

Spending will accelerate as people look to make the most of the heatwave.

“The golden era of debt repayment is about to end in a summer spree,” she warned.

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Banks anticipate a rise in credit card, loan and mortgage defaults in the three months to September 30 and things could get worse after furlough ends.

Coles said: “If job losses rise, people who have been struggling to keep their head above water will finally succumb.”

She added if you are keen to join the rush for fun then consider the alternatives before borrowing money which you may struggle to repay: “Free up cash by trading down at the supermarket or shopping around for cheaper home energy and car insurance.”

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Anthony Morrow, co-founder of low-cost financial advice platform OpenMoney, suggested drawing up a monthly budget, including mortgage or rent costs, household bills, groceries, transport costs and savings: “As part of this, you could also include a budget for spending and having a bit of fun.”

Many feel under pressure from family and friends to spend, but Morrow said that you should talk this through together: “Money can all too often be a taboo subject with family and friends, but make a unified effort to control spending.”

Taking on too much debt today could prove a problem if further lockdowns are enforced in the autumn.

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Research from debt charity StepChange shows that seven million people fell behind on essentials or had to borrow money to make ends meet during the pandemic, while The Big Issue is predicting a rise in evictions and homelessness.

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