- Four out of five over-55s are concerned about affording new repayments once their current fixed rate deals ends
- More than one in five face having to find a new mortgage deal within a year
The looming fixed rate mortgage crunch could force over-55s back to work as affordability worries build, new research from the UK’s leading equity release adviser Key Later Life Finance shows.
Almost four out of five (79%) over-55s with fixed rate mortgages are concerned about being able to afford repayments once their current deal comes to an end. Of these, around 20% are extremely concerned, Key’s unique nationwide study with over-55s who have mortgages found.
The research reveals that for more than one in five (22%) – or around 316,000 households – the crunch will come within a year when their current deals run out. Indeed, with the Office of National Statistics suggesting that most fixed rate deals ending in 2023 were set below 2%, some borrowers are facing a 5.65% (two-year fix) jump with those moving to SVR fairing even worse.
| Average Mortgage Rates | Existing | New | Difference |
| Five-Year Fix Rate | 1.71% (Q3 2018) | 6.37% | 4.66% |
| Two-Year Fix Rate | 1.20% (Q3 2021) | 6.85% | 5.65% |
| Five-Year Fix Rate to Lender SVR | 1.71% (Q3 2018) | 7.85% | 6.14% |
| Two-Year Fix Rate to Lender SVR | 1.20% (Q3 2021) | 7.85% | 6.65% |
The research found 70% of over-55s are on fixed-rate mortgages with an average two years left to run on the deal which suggests that unless rates have come down drastically be 2024, borrower may still be facing hard choices.
The fixed-rate crunch impact on over-55s
Key’s study – conducted before the latest Bank of England rate rise to 5.25% – found 23% of over-55s say they may have to return to work or work longer hours in order to afford a higher fixed rate deal. Around 22% say they don’t think they can manage a rate of 6%-plus.
Around one in five (20%) are worried they may go into arrears on their mortgage as a result of rate rises while 21% say they haven’t dared think about their situation and 17% say they may have to downsize or sell their home to meet repayments.
What they plan to do?
Almost a quarter (23%) say they are confident they will be accepted for the best possible rate for their situation when their deal ends while 25% hope they will be.
Around 15% say they will go on to their lender’s Standard Variable Rate (SVR) and then look for a better rate when the market environment changes, while 7% say they will be happy to just stay on the SVR. Around 10% say they will take their lender’s offer and not seek advice.
Will Hale CEO at Key said: “Most over-55s with mortgages have been protected from the impact of the Bank of England’s series of rate rises as they have been on fixed rate deals with many paying less than 2%. Unfortunately, that era of low mortgage rates is over. Many older homeowners are now heading for steep increases in their monthly repayments and, particularly given the continuing increases in other cost of living expenses, worries about being unable to afford higher rates are growing.
“Managing an increase of 5.65% when moving from one two-year fix rate mortgage to another or seeing an even larger 6.65% jump when you move to your lenders standard variable rate is understandably frightening. However, there are things that can be done – provided you take the time to consider what you need ahead of time rather than waiting until you are forced to remortgage and pushed into a rushed decision.
“No one option is right for everyone but by speaking to an adviser who specialises in later life lending products, you can gain an understanding of your different choices. You may find that a retirement interest only mortgage is right for you or perhaps a modern equity release plan which offers more flexibility around repayments – allowing interest to be served, ad hoc repayments to be made or even no repayments at all if your finances are particularly stretched. Taking the time to get specialist advice will pay off in the future and help customers to manage the rate shock.”
There is a wealth of information online for customers to educate themselves on later life finances. On Key’s website consumers can use the later life mortgage finder tool to find out further information as well as being able to download a full guide regarding later life finances. www.keylaterlifefinance.co.uk.
Customers have rated Key Later Life Finance as Excellent with over 16,628 Trustpilot reviews giving the company a rating of 4.7 out of five.
