Urgent mortgage warning for anyone above the age of 65 – are you facing a ticking time bomb?
HUNDREDS of thousands of pensioners face paying off their mortgages into retirement, according to new figures.
The number of mortgaged pensioners without any savings has also jumped by a third since the cost of living crisis took hold.
There are 450,000 pensioners owning their home with a mortgage – yet half have savings and investments of £3,000 or less, according to research from Labour.
In 2019-20 there were 50,000 mortgaged pensioners with no savings. And by 2021-22 this had increased to 70,000.
Nicholas Mendes, mortgage technical manager at broker John Charcol, said: “As the average age and term for a first-time buyer increases, there is a growing concern on how much individuals are actually preparing for retirement.
“In April 2019, the minimum contributions to auto-enrolment workplace pensions were raised to 8% of earnings, including what the employer puts in and tax relief from the Government.
“But think tanks feel that even the increase is unlikely to give people the pension pot they’d need for a comfortable retirement.
“The problem is accentuated for pensioners who face paying a mortgage after finishing work.”
Mortgage help for older borrowers
Unlike younger homeowners, pensioners can be more limited in options to help reduce and manage mortgage costs.
For example, they are less likely to have the option of extending their mortgage term to reduce monthly payments.
In the first instance, anyone struggling should contact their lender to ask what help can be provided.
Ben Tadd, director at Lucra Mortgages, said: “The new mortgage charter, that a significant amount of high street lenders have signed up to, allows borrowers to either switch their mortgage on to interest only, or extend the mortgage term for up to six months.
“The aim of which is to help reduce mortgage payments down, while rates remain high.
“However, borrowers need to be aware of the associated risks here too, as they will end up paying more interest by electing to go down either of these routes.
In the longer term, there are some specialist options which can also help.
For example, retirement interest only mortgages (RIO) or equity release may be the right solution for some struggling borrowers.
Nicholas explained: “A RIO mortgage is an interest-only mortgage with no set term.
“It’s a later life product that comes with monthly interest payments and is only repaid when the property sold, upon your death or if you enter long term care.
“You’ll only be eligible for a RIO mortgage if you’re over 50 and can afford the monthly interest payments.
“Alternatively, if you’re aged 55 or over and are considering later life lending options, equity release could be a solution.”
The most popular type of equity release product is a lifetime mortgage.
With a lifetime mortgage, you borrow a percentage of the value of your home from a lender.
You’ll still own your property but will have a loan secured against it.
There are no affordability checks or requirements to make monthly repayments, as the interest charged is typically rolled-up which means it is added to the outstanding mortgage balance.
The loan plus rolled-up interest is repaid when the plan ends, usually after you or the last surviving applicant pass away or move into long term care.
It’s important to get specialist advice from an expert who can help to find the right option based on your circumstances.