Demystifying non-mortgage borrowing in older age

A longitudinal approach

Why does the use of non-mortgage borrowing, such as credit cards, overdrafts and cash loans persist into older age?

Using data from the 2006-10 Wealth and Assets Survey PFRC, in partnership with ILC-UK, have explored the levels and drivers of borrowing amongst people aged 50 and over using longitudinal techniques.

The key findings are:

  • One in four people aged 50 and over have outstanding non-mortgage borrowing, each owing an average of £4,500.
  • The oldest-old are much less likely to have outstanding borrowing than their younger counterparts. This is principally the effect of ageing, rather than the cohort someone was born into, although cohort effects may play a greater role as people approach their 50s.
  • With fewer than one in five older people transitioning into or out of borrowing over a two-year period, the dominant picture is one of persistence in credit use. Existing credit users – including those in their late 60s and early 70s – were more likely to become bigger borrowers (owing more after two years) than non-credit users were to become borrowers.
  • Having high fixed household costs, for example from rent or mortgage payments or having dependent children in the household, is a key factor in driving older people’s credit use. Low incomes and drops in income compound this further.
  • In addition, older people who struggle to make their incomes last until the end of the week or month are consistently more likely to have outstanding borrowing, and to owe more, than their counterparts who routinely have money left over.
  • There is no evidence that the constriction in credit supply which followed the financial crash of 2008 significantly impacted older people’s actual levels of borrowing, at least not be 2008-10 when the last available wave of data were collected.
  • Higher-cost credit, such as home credit and payday loans, was not a particular feature of older people’s credit use, although this may change as further waves of data become available.

This publication is also available on the ILC-UK website.

Demystifying non-mortgage borrowing in older age (PDF, 484kB)