“In general, older consumers are carrying more debt, including mortgage, credit card, and even student loan debt, into their retirement years than in previous decades,” the report stated. “Mortgage debt, the largest debt that older consumers carry, is the key driver of this trend.”
Compared to a decade ago, fewer seniors own their homes outright. About 4.4 million retired homeowners are still making mortgage payments on top of their other expenses, the report stated.
“…As a result of carrying increased mortgage debt, many older Americans have accrued less home equity
than their age group did a decade ago,” the report stated. “Less home equity
means less accumulated net wealth for many consumers.”
According to the report, the refinancing boom of the early 2000s contributed to the rising number of seniors with mortgage debt, as well as a growing trend among Americans to buy first homes later in life, make small down payments and borrow against their home equity
. The percentage of homeowners 65 and older carrying mortgage debts increased from 22% to 30% between 2001 and 2011. The percentage of US consumers over 75 who still have mortgage debt more than doubled, spiking from 8.4% to 21.2%.
Older consumers also owe bigger balances on those mortgages than they did a decade ago, the report found. Between 2001 and 2011, the median amount seniors owed on their homes skyrocketed 82%, from $43,400 to $79,000.
“Furthermore, older consumers owe more on their mortgages in relation to the value of their home than a decade ago,” the report stated. “The outstanding balance on their mortgages relative to the value of their homes (debt-to-value ratio) increased from 30 to 46 percent from 2001 to 2011.”
That mortgage debt has a domino effect, driving up other costs. In 2011, seniors with a mortgage spent 290% more in housing costs than those with no mortgage, the report found.
Foreclosures and delinquencies among the elderly have also spiked since the financial crisis. Between 2007 and 2011, the percentage of older homeowners who were seriously delinquent paying their mortgages shot up fivefold, the report found. Foreclosure rates among homeowners age 65-74 rose from 0.25% to 2.55%, while foreclosures amo0ng those 75 and older increased from 0.33% to 3.19%. In 2007, about 30% of seriously delinquent older homeowners were in foreclosure. By 2011, that number spiked to 50%.
“The increased mortgage debt load is having substantial financial consequences on many of them,” the report concluded. “…For this reason, carrying a mortgage well into retirement poses many potential challenges for older Americans who typically live on reduced income yet face increased expenditures for health and long-term care.”
Rising mortgage debt is threatening the retirement security of millions of senior citizens, according to a new report from the Consumer Financial Protection Bureau.