Over 100,000 over-65s are still paying off mortgages, according to new research from More 2 Life.
The equity release lender found that these people are spending around £1.36 billion a year clearing home loans despite the potential risks of keeping up payments after the State Pension Age.
Its analysis shows up to 103,000 over-65 households are paying mortgages with around 81,000 households in the 65-74 age group and 22,000 in over-75 age groups.
The high number of over-65s still clearing home loans reflects changing work patterns with more people working past traditional retirement ages and the rising age of first-time buyers, More 2 Life believes.
But it warns that the numbers paying off loans past 65 is a potential mortgage timebomb which could leave pensioners at risk of struggling to make payments as their incomes reduce.
And it forecasts the issue is likely to become a bigger problem as more homeowners with interest-only mortgages come to the end of their term – the Council of Mortgage Lenders estimates 150,000 interest-only loans will mature each year until 2020.
More 2 Life has launched the first equity release plan which enables customers to continue to pay interest while protecting the equity in their property and accessing additional funds.
Its Interest Choice Plan, which is available from 1 November, allows customers to choose how much of their loan they want to pay interest on and over how long while fixing the rate they pay and enabling them to withdraw money. Customers can choose to pay all or part of the monthly interest on their loan and choose how much to withdraw. Those who do not take the whole loan-to-value can make further withdrawals.
Jon King, managing director of More 2 Life, said: “There is a potential mortgage timebomb ticking with pensioners paying home loans way past traditional retirement ages.
“Some can afford to pay off their mortgages but many will face income shocks and could really struggle if they still need to pay off a home loan as well as paying for the basics.
“The Interest Choice Plan enables people who can afford to pay interest to cut debts while protecting the equity in their home as well as providing much needed flexibility. Innovation is the key to tackling mortgage market issues and helping customers.”
The rate on the Interest Choice Plan, which is funded by Just Retirement, of 6.17% monthly is fixed for life and payments are subject to a £25 minimum. Clients do not have to choose a term over which to pay the interest and can stop free of charge at any time. On further withdrawals rates are fixed on the rate applicable then.
Loan to values start from 20% at age 60 rising to 36% at age 75 and the maximum is 45% at age 85-plus.
The minimum initial lump sum is £10,000 and the minimum facility including drawdown is £15,000 with the minimum drawdown facility set at £5,000.Minimum property values are £70,000. Valuation fees start from £200 and the arrangement fee is £695.
