Homes in the Cotswald, UK

Number of over-70s arranging mortgages rises 75%

The number of over-70s taking out mortgages has increased by 75 per cent to 16,000 in the past five years.

According to the financial website Thisismoney.co.uk, 16,000 people in their 70s have arranged a new mortgage deal for their home since 2012. They now account for nearly a fifth of all lending to the over-55s, a jump from 1 in 10 just five years ago.

So why the sudden rise?

Experts in the industry have suggested that many are being forced to arrange new mortgages because of their interest-only mortgage deals are coming to an end.

The interest-only time bomb explained:

  • Almost 1 million homeowners in the UK are facing the reality of their interest-only mortgage deal coming to an end, with no plan in place as to how they will repay the loan*.
  • The average estimated shortfall for interest-only loans is £71,000*.
  • The Council of Mortgage Lenders (CML) estimates 43 per cent of borrowers today aged 55 or over have at least part of their mortgage on interest-only.
  • A recent study conducted by CML found that 40 per cent of borrowers who took out a mortgage in 2016 will still be paying it off after the age of 65 — almost double the number of borrowers in 2012.
  • The study also revealed that in 2016, older homeowners borrowed £112,000. That’s 11 per cent more than the average amount borrowed 5 years ago in 2012.

All the signs are pointing to the increased demand for retirement lending only rising further over the coming years.

It makes sense then, that banks, building societies and equity release providers are offering more flexible and innovative products for the over-55s than ever before.

Traditional later-life mortgages

Mortgages for those in or approaching retirement became much more accessible over the last few months.

Last year, Halifax and Nationwide increased their maximum age limit for mortgage borrowers from 75 to 85 years old. There are also a select few building societies that offer no age cap at all for some mortgage products.

The main drawback with conventional mortgages is that you will need to prove you have sufficient income to make the repayments. For homeowners getting by a pension income, or with a history of poor credit, it may prove difficult to get approved.

The flexibility of modern lifetime mortgages

Lifetime mortgages – also known as equity release plans – have been increasing in both flexibility and popularity, and offer an alternative to a traditional mortgage loan.

Following the launch of a range of innovative new options in recent years, including the ability to make voluntary payments on loans, equity release broke records across the board with £2billion unlocked last year alone**.

Many of today’s lifetime mortgages offer low rate fixes for life, interest-only deals and flexible payment options that are not too dissimilar to conventional mortgages.

Why equity release is soaring in popularity:

  • Unlock a tax-free cash lump sum to spend in any way you choose, including repaying your mortgage loan
  • The interest is typically rolled up and added to the loan, so there are no monthly repayments to make
  • There are no affordability checks
  • Some plans enable you to make voluntary payments of up to 10% of the original loan amount every year – so it is possible to clear the loan over time if you wish
  • The loan plus interest doesn’t have to be repaid until you pass away or move into long-term care, at which point your home is sold and any remaining money from the sale is returned to your estate

To find out more about equity release, why not request your FREE guide or arrange a free, no-obligation initial consultation in your home by calling 0800 411 8668.

Equity release will reduce the value of your estate and the amount of inheritance you leave.

*Citizens Advice Sept 2015
**Equity Release Council April 2017