Almost one in two homeowners aged 55 or over will pay an additional £400 a month on their mortgage after their current fixed rate deal expires.
These figures were produced by Key Later Life Finance to show the extent of the “mortgage crunch” for older homeowners.
A total of 47% of homeowners in this age bracket said they expected repayments to rise by an average of £5,000 a year. This steep rise is creating problems for many with more than one in 10 (13%) in this age group saying they are concerned they will slip into arrears on their mortgage as they head into retirement.
A further third (30%) said they were “unsure” what will happen to their monthly payments at the end of their current fixed-rate term.
Key’s research shows that the average monthly mortgage payment for the over-55 age group is currently £700, with these repayments accounting for around 20% of their monthly outgoings. The later life specialist says this underlines the financial pressure older homeowners are under from the cost-of-living crisis as they try to juggle bills with saving for retirement.
Its research found that around one in seven (15%) said mortgage repayments currently account for 30% or more of their monthly outgoings, with 11% saying monthly repayments total £1,500 or more.
The research shows this age group are taking action to limit increases, with one in five taking advice on reducing their mortgage repayments and one in four having already spoken to their current lender.
Key’s research points out that that the current best rates for two-year and three-year fixed rate mortgages are 4.54% and 4.49% respectively, with many over-55s remortgaging from deals at around 2% or lower.
Key has recently launched its Payment Term Lifetime Mortgage specifically to support later life homeowners struggling to meet increased monthly mortgage repayments as fixed rate deals end. This allows partial interest payments to help manage monthly borrowing costs.
Borrowers have to commit to a period of mandatory payments which last until the oldest applicant’s 66th birthday, but payments only have to be partial monthly interest payments making the monthly cost more affordable than a standard residential mortgage or a retirement interest only mortgage.
Key’s research shows growing interest in the wider range of options, with 44% of over-55s homeowners saying they are aware of later life lending options and 36% say they are interested in PLTMs.
Key managing director Chris Bibby says: “Over-55s homeowners at the end of fixed rate deals are facing substantial increases which will have a major impact on their finances.
“Our research shows average increases will be around £400 a month and when homeowners are already spending 20% of their income on mortgage repayments that will make a big difference to budgeting particularly for people who are also trying to prioritise pension savings.
“The later life lending market is evolving rapidly, so over 55s should seek specialist advice to be able to look at the burgeoning number of product options available.”
