The UK’s rising mortgage burden is posing a major challenge for over-55s trying to balance household finances and prepare for later life, according to Key Advice.
The equity release specialist is calling on mortgage advisers to widen the range of solutions they offer, or work with later life lending experts, to ensure older clients are not left exposed.
MORTGAGE PRESSURES AT RECORD LEVELS
Key’s analysis shows that average earners who bought homes in the past two years are now spending nearly 50% of their monthly income on mortgage repayments – the highest level since the 2008 financial crisis. While average wages have grown 237% since 2000, house prices have risen 345%, leaving a growing affordability gap.
Key’s own research found that almost one in four (24%) homeowners over the age of 55 with outstanding mortgages expect to still be making repayments after retiring from full-time work. Those approaching the end of fixed-rate deals are particularly vulnerable as repayments eat further into their income.
Figures from the Equity Release Council show the increasing reliance of this age group on later life lending, with almost half (48%) of borrowers aged 55 to 60, and nearly three quarters (73%) aged 55 to 65.
NEW FLEXIBILITY
Key points to the expanding range of lifetime mortgage products as a potential solution. These allow borrowers to make partial or full interest payments and, in some cases, flexible capital repayments to reduce the impact of roll-up interest.
Some products require mandatory repayments in exchange for higher borrowing or lower rates, while others allow customers to switch to full roll-up later in retirement, with a fixed rate for life.
Such innovation is designed to give older homeowners greater choice, reduce monthly commitments, and help maintain a reasonable standard of living while managing long-term borrowing costs.
CALL FOR RESPONSE
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.”
She added that both mainstream mortgage and wealth advisers should recognise the advances made in the lifetime mortgage market and ensure these are considered when working with older clients.
