Moving house into rented accomodation

A third of over-50s having to rent

Rising divorce rates and thousands of interest-only mortgages coming to an end have contributed to almost a third of over-50s living in rented accommodation.

  • Almost 1 in 3 people aged 50 and over now rent the home they live in
  • The figure has increased from just over 1 in 4 in 2011
  • Overall rise has been attributed to an increase in the number of ‘silver splitters’
  • Interest-only mortgages coming to an end may also be causing increase
  • Equity release could enable homeowners to stay where they are

In the last 5 years 15 per cent more people in their early 50s have been renting the home they live in, according to a report by Saga Home Insurance*.

Rental rise of the ‘silver splitters’

The increase has been partly blamed on rising divorce rates and thousands of interest-only mortgages coming to an end.

It is believed that later life divorcees, or ‘silver splitters’, who are dividing their assets, namely the family home, that they do not have enough equity to buy two smaller properties.

Furthermore, the money they are left with to use as a deposit may be rendered useless if they cannot get a mortgage on their own, perhaps due to a lower single income or their older age.

Equity release a divorce solution?

The upheaval in selling and moving away from the family home could be extraordinarily unsettling, at an already very stressful time in their lives.

For those not wishing to sell the family home to free up the equity, perhaps so younger children can continue to live in the family home with one of their parents, the solution may lie in a lifetime mortgage.

According to Bower’s latest figures, getting a divorce is cited as the #10 reason for taking out an equity release plan. It allows homeowners to unlock a percentage of the home’s value to pay off the other partner, without having to sell the family home.

The interest-only time bomb

For the over-55s who feel they have no choice but to sell their home and rent after their interest-only mortgage comes to an end, equity release could again be a solution.

According to recent data from property firm Homewise, over-55s with an interest-only mortgage owe an average of £91,000, with one in seven owing more than £150,000*.

By arranging a lifetime mortgage, worried homeowners could clear their interest-only mortgage with the option to make voluntary repayments on the plan if they choose. If not, the interest will roll up and be added to the original loan, which is only repayable when the plan comes to an end (usually when you pass away or move into long-term care).

Bower’s own figures show that clearing a mortgage is the #2 reason for homeowners releasing a tax-free cash lump sum from their homes in the first six months of 2016.

Later life mortgages

For those who wish to sell the family home and start afresh, whether to settle a divorce or rid themselves of their interest-only mortgage, there are later life mortgages available which could prevent older people being forced into renting.

Whilst many mortgage lenders have been traditionally reluctant to approve loans to those who are in or approaching retirement, in recent months high street lenders including Nationwide and Halifax have been leading the way by allowing people aged up to 85 to have a mortgage, dependent on their pension or work income.

Your retirement lending options

With so many options to choose from, it is always recommended to seek the guidance of an independent specialist in retirement lending before making a decision.

Your Bower specialist will take the time to explain all the advantages and disadvantages to you, including how equity release will reduce the value of your estate and how it may affect your entitlement to some state benefits. If you choose to go ahead, we can take care of everything for you.

Speak to us today to arrange your free, no-obligation initial consultation on 0800 411 8668.

*Zoopla 04/07/16