A fifth of over 65s will still be paying back mortgage
2 December 2020
Homeowners paying back mortgage in retirement
The price of a house in the UK keeps rising year-on-year, with the Government’s latest report on the house price index valuing the average UK house at £231,885 and even higher in certain locations, such as London, where the average house costs £485,794. The rising costs of UK houses is putting additional pressures on homeowners to pay back their mortgage, with a recent report by Hargreaves Lansdown finding that one in five homeowners aged over 55 believes that they will still be paying back their loan well into their 70s. Importantly, most retirees have a reduced income compared to their working salary, meaning that the additional burden of having to pay back a mortgage is going to make the household purse-strings feel even tighter.
The same report also found that 5% of respondents thought that they would never be able to pay back their mortgage, meaning that the debts on their estate will have to be paid by their executor before anything left can be paid to the beneficiaries of their will.
This idea was also supported by a report by the Financial Conduct Authority, which stated: ‘terms are increasing with 34% of mortgages now longer than 30 years… 40% of borrowers who took out a mortgage in 2017 will now be aged over 65 when their mortgage matures’.
Over 65s worried about running out of money
Another report by Independent Age found that for almost a quarter people in the over-65 age category, their biggest worry was that they would run out of money. Significantly, a further 8% cited not being able to pay for care costs as their greatest concern.
Still having a mortgage to pay at over 65 will contribute to these financial concerns. Unfortunately, it looks like the problem will only get worse, with the International Longevity Centre UK finding that ‘the amount of mortgage debt held by over 65s is set to increase by more than £19 billion by 2030’.
Could equity release help retirees struggling to repay their mortgage?
One option for people who are worried about how old they will be before they can finally repay their mortgage could be to release some equity; home reversion schemes and lifetime mortgages can be used to clear an existing mortgage. Unlike a traditional mortgage, with equity release loans you don’t have to make monthly payments, although you can opt to make interest payments so that you can maintain the value of equity in your property.
Our founder and Managing Director, Jan Johnson, said: “The idea of repaying your mortgage after you retire can be a scary prospect and we get lots of enquiries from people looking to explore whether releasing equity could be one way to avoid this. At 55Plus Equity Release we pride ourselves on giving our clients impartial advice, which enables them to consider all the relevant information when making the ultimate decision as to whether they think releasing equity is right for them.”
If you’re worried about when you’ll be able to pay back your mortgage, then one solution may be to release some equity. If you want an impartial meeting with a friendly face, then one of our expert advisers would love to discuss your individual circumstances.