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Mortgage sales for over 61s increase from £11.3bn in 2021 to £14bn in 2022 as borrowers aim to limit inheritance tax bills

The value of mortgages taken out by borrowers aged 61 and over has increased 24% from £11.3bn in 2021to £14bn in 2022*, shows new research from Bowmore Financial Planning.

Bowmore explain that this has been caused by elderly borrowers using mortgages to minimise Inheritance Tax owed on their estates after they pass away.  

The value of mortgage sales taken out by borrowers aged 71 and over has also increased by 28% from £1.6bn to £2.1bn over the same period. 

Borrowers who want to minimise the amount of Inheritance Tax owed on their estates can take out debt against the value of their property and gift this amount to their children. Providing the money is given at least seven years before death, no Inheritance Tax will be incurred on the gift.  

Bowmore says that an increasing number of mortgage providers are willing to lend to borrowers aged 61 and over, provided they can meet the necessary repayments on their debts. The wider range of mortgage products available for over 60s means rates are becoming far more competitive.   

Mark Incledon, Chief Executive at Bowmore Financial Planning, says: “For those looking to protect as much of their children’s inheritance as possible, taking out a mortgage and gifting this money can be an effective part of Inheritance Tax planning.”  

“Many of those who plan on leaving an inheritance will prioritise paying their mortgages off first, instead of thinking carefully about what they will leave behind for their children. Unfortunately, this means that although they have cleared their debts, they often leave their children with very little cash inheritance. They will also likely face a hefty tax bill on the property they inherit.” 

“By taking out a mortgage later in life and gifting this amount to your children, you are able to give them a tax-free buffer to enjoy more of the inheritance you have provided for them.” 

Bowmore points out that over £7 billion was paid in Inheritance Tax between April 2022 and March 2023 alone. This is up £1 billion on the same period last year, as rising house prices continue to push the value of estates beyond the inheritance tax-free threshold. 

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