Almost one in three over-55s with a mortgage admit cost of living crisis has impacted repayment plans

by | Jan 11, 2023

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Latest tracking research from the UK’s largest equity release adviser Key highlights that 30% of over 55s believe that their ability to repay their mortgage will be hindered due the cost-of-living crisis, equating to around 879,000* people’s mortgage plans being derailed. 

 Total55-6465-74Over-75*
No. over-55s homeowners with outstanding mortgages3,399,7432,114,321744,411224,829
% who believe Cost of living crisis will impact their plans30%34%16%17%
Total Impacted879,545724,910117,53937,097

Of those 3.3 million over-55s who have yet to repay their mortgage, 16% say they plan to repay their mortgage ahead of retiring but the cost-of-living crisis will make it harder while 13% say it will take them longer. Two in five (40%) over-55s have already repaid their mortgage.

Growing Challenge:

To track the ongoing impact of the current high inflationary environment, Key undertook this research in both Q2 2022 and Q4 2022.  This showed a growing realization amongst over-55s that changes in the mortgage landscape would impact their plans – especially following the volatility after the mini-budget in September.

 

Interestingly in Q2 2022, 44% of over-55s with mortgages said that the current environment had no impact on their plans to repay their mortgage.  However in just six months, this had fallen to 28% as the impact of rising inflation, tightening affordability criteria limiting the ability to secure new/better deals and rising household bills saw more people doubt their ability to stick to their repayment ambitions.

The proportion of people who intend to repay their mortgage ahead of retirement increased to 19% but it is entirely possible that some have chosen to delay finishing work to achieve this.  We’ve also seen a five percentage point increase in the number who say that they will repay their mortgage prior to retirement but will find this harder.

Mortgage Repayment IntentionsQ2 2022Q4 2022
Cost of living crisis has impacted repayment plans27%30%
The current environment (i.e. rising cost of living) has had no main impact on my plans to repay my mortgage44%28%
I intend to repay my mortgage prior to retirement, and this has not changed16%19%
I still intend to repay my mortgage prior to retirement but I will find this harder11%16%
I still intend to repay my mortgage after I retire but may need to take longer9%13%

Will Hale, CEO at Key, the UK’s largest equity release adviser, said: “The cost-of-living crisis is no longer a short-term challenge but one that has far longer implications for many – especially those who are older and looking to pay off their mortgage.   It is extremely worrying that almost 900,000 over-55s are going to find it tougher to repay their borrowing as they work hard to deal with rising household bills alongside the need to save enough to be able to enjoy a secure and fulfilling retirement.

 

“With a larger proportion of their income being used for utilities and groceries – expenses which have been particularly hard hit by inflation – many over-55s are considering how they can cut back in other areas or even return to work in order to better manage their finances.  However, some are already living extremely prudent lives so are likely to feel under increasing pressure to make ends meet.

“While homeowners should always get specialist advice before they choose to access the equity in their homes, this option should be considered carefully – especially given the flexible nature of products like equity release.  With the ability to serve interest and/or make ad hoc capital repayments , older borrowers can reduce their outgoings while still carefully managing their borrowing. Also, with fixed early repayment charges which can disappear completely in as little as five years on certain products, a lifetime mortgage no longer has to be a product for life. As circumstances change, for example of the back of an inheritance, customers may find themselves able to fully repay their equity release loan or alternatively remortgage to another product that may offer better rates or features than those available today.

There is no doubt that many older customers are facing significant financial challenges, however, there are options available to help ease the pressure and specialist later life lending advisers are ready to help”

 

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