Rising mortgage rates and persisting inflationary pressures have meant that 2-in-5 (41%) homeowners are now expected to still be paying off their mortgages during retirement, according to Equifax. The same data reveals over a quarter of these borrowers will be over 70 years old when their mortgages mature, with the average two-year fixed mortgage rate reaching 6.67% amidst a period of significant financial strain for homeowners across Britain.
As the number of borrowers opting for longer term loan terms continues to steadily rise as a result, Rudy Khaitan, Managing Partner of the UK’s leading later-life lending specialist, Senior Capital, comments on the growing use of equity release as a financial tool for consumers in a “very tight situation”, particularly for ‘asset rich’ pensioners looking to access capital for a much-needed cash injection, enhance their quality of life, and even help their families get on the housing ladder amidst a turbulent period across the mortgage market.
Equifax’s data highlights that many of those whose loans won’t mature until after the age of 66 are already 55 or older, with 16% of them currently owing £100,000 or more. Following a 15% rise in average monthly mortgage payments since last year alone, borrowers approaching retirement could be unable to extend their loan terms any further which could result in increased monthly repayments while simultaneously dealing with higher living expenses such as grocery and utilities.
At a time when pensioners are beginning to outnumber children and a record cost-of-living crisis is permeating households, slashed finances means retiring comfortably has been put on hold for millions across the UK. The average pension pot currently stands at just £107,300 – indicating a lack of sufficient savings for a comfortable retirement – while 22% of pensioners have reduced or stopped spending on medications and a further 5% have skipped meals, according to Age UK. This has led to a 23% year-on-year increase in people turning to equity release – a financial service allowing homeowners to access capital tied up in their home without selling it – as a vital lifeline amidst the cost-of-living crisis.
Managing Partner of Senior Capital, Rudy Khaitan, comments:
“Equity release is not just a tool for pensioners to enhance their own lives, it’s also a way to transfer wealth to the next generation. By unlocking the value tied up in their homes, parents and grandparents can provide their family members with life changing capital that could fast track their path onto the property ladder, or as seed capital for them to pursue their professional or entrepreneurial aspirations. Equity release is about more than immediate financial relief, it provides a means to shape a brighter future for families across the UK, helping them achieve their dreams of ultimate financial stability.”
