The UK’s rising mortgage burden is a major threat to over-55s looking to manage cost of living and plan for later life, Key Advice, the UK’s leading equity release adviser, warns.
It is urging mortgage advisers to expand the solutions they offer to over-55s customers to include later life lending products or to agree referral deals with later life lending specialists who can provide advice on the growing range of products available.
New analysis shows average earners buying houses in the past two years now face the highest mortgage burden since the 2008 financial crisis, spending nearly 50% of their monthly income on repayments.
The data highlights how average wages have dramatically lagged house prices – average wages have increased 237% since 2000 while average house prices have surged by 345%, underlining the risk and potential opportunity for over-55s homeowners.
Key’s own research shows one in four (24%) of over-55s homeowners with mortgages expect to be still repaying home loans once they have retired from full-time work.
It believes over-55s homeowners coming to the end of fixed-term mortgage deals particularly need support in coping with the UK’s rising mortgage burden with average repayments taking up a bigger proportion of monthly pay.
That is reflected by Equity Release Council figures showing around half (48%) of later life lending borrowers are aged 55 to 60, and more than 73% are aged 55 to 65.
Key points to the growing number of lifetime mortgage products which enable borrowers to serve some or all of the interest, as well as providing the option to make flexible capital repayments. This manages the impact of roll-up interest and cost of borrowing while being able to reduce committed monthly mortgage payments and ensuring they can maintain a reasonable standard of living
These modern lifetime mortgages include products requiring some mandatory repayments in return for the customer being able to borrow more than through a traditional lifetime mortgage or at a lower rate. Increasingly, lifetime mortgages are designed to evolve with borrowers as they move into retirement, offering the option to eventually transition into a full roll-up product with a fixed interest rate for life.
Rachel East, Senior Director at Key Advice, said:
“The UK’s rising mortgage burden which is resulting in borrowers on average earnings spending the highest proportion of their monthly income on mortgage repayments since 2008 shows the need for innovation in both products and advice.
“Mainstream mortgage advisers need to widen the options they offer to older customers or work with later life lending specialists who can do so. Irrespective of scope of advice limitations, Consumer Duty obligations require advisers to have comprehensive conversations and make customers aware of all the options available to help them achieve a good outcome.
“Older customers should not be worrying about their mortgage burden rising when there are innovative products available to relieve the pressure and which offer flexibility around repayments to allow cost of borrowing to be managed.
“Mainstream mortgage advisers, and wealth/investment advisers, need to recognise the innovation that has taken place in the lifetime mortgage sector and ensure that all options are considered when dealing with older customers.”
