Key Advice has warned that around 26,000 people aged over 65 died last year still owing money on a conventional mortgage, raising concerns about the financial risks for surviving partners and beneficiaries.

The later-life lending specialist said that with around 500,000 retired homeowners still repaying mortgages, more needs to be done to help older borrowers manage debt and avoid potential repossession.

According to industry data, more than a quarter of inherited estates now include properties that still have a mortgage attached. While most lenders offer bereaved partners a short grace period – usually between three and six months – interest continues to accumulate during this time, and the surviving partner may struggle to maintain payments.

Key said greater use of later-life lending solutions such as lifetime mortgages could reduce financial distress and protect families from the risk of losing their homes. It urged advisers to treat equity release as a proactive financial planning tool rather than a last resort, stressing the need for “comprehensive conversations” that include family members and explore all available options.

Lifetime mortgages, which allow older homeowners to release equity without having to make mandatory repayments, can offer security by removing the risk of repossession or negative equity. However, Key said that affordability assessments remain vital, particularly when borrowers choose to make ongoing payments.

Will Hale, chief executive of Key Advice and Air, said: “Financial wellbeing is at the core of successful long-term financial planning and particularly important for over-65s with outstanding mortgages.

“Advisers need to continue to engage with older customers, and their families, and consider all options in order to deliver good outcomes in line with Consumer Duty obligations.

“Later-life customers should not be worrying about the risk of repossession but that is a potential risk as the number of over-65s with mortgages continues to rise.

“They need solutions that enable them to make payments, to continue to manage their cost of borrowing, whilst allowing for flexibility to maintain their standard of living even when circumstances such as ill health or reduction in employed income may happen unexpectedly.”

Hale added that mainstream advisers also have a role to play in supporting older clients: “Mainstream mortgage 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 over-50s customers.

“Payments must be affordable, not just according to lender eligibility but with individual risk appetite in mind, and customers must not be placed in products which may be unsuitable for their current circumstances or foreseeable future changes in their situation.”

Key said its findings underline the importance of better integration between mainstream and later-life mortgage advice, with referral relationships ensuring customers receive the right support throughout their financial journey.