- 14% of retired homeowners have outstanding mortgages that are consuming 28% of their annual income
- Rising mortgage interest rates are putting further pressure on fixed retirement incomes
While some sections of the UK’s over 65s are enjoying life as never before, one in seven (14%), are weighed down by mortgages that have run into their retirement and are enduring the growing pressure of meeting mortgage repayments from limited retirement income – something that is exacerbated each time mortgage interest rates rise.
For those entering retirement with an outstanding mortgage, monthly repayments on an average mortgage of £32,000 are likely to be approximately £344, an annual expense of £4,128. With the average income for pensioners currently £14,600 p.a.4, mortgage repayments are therefore consuming almost 28% of mortgaged pensioners’ annual income.
And, as interest rates rise, this is increasing – the 1% rise in rates in the past 6 months will have added a further £16.07 per month to pensioners’ mortgage bills, which adds up to £193 per annum, or a further 1.3% of their annual income5.
However Key Retirement Solutions says that many retirees with mortgages could benefit from considering Equity Release. By releasing equity through a lifetime mortgage, such retirees could not only erase their existing mortgage debt, reducing their outgoings by an average of £4,128 per annum, but also have the opportunity to simply take a cash lump sum.
Colin Taylor, Managing Director, Key Retirement Solutions says: “Many retired people are suffering from reduced disposable incomes because they are trying to clear an outstanding mortgage in retirement, a trend that is growing as people buy their first property later in life, and re-
mortgage into middle age.
“However, with the value of equity held in property by the over 60s now calculated at over £1 trillion6, there is tremendous scope for today’s retirees to use Equity Release to clear an ongoing mortgage debt and boost their disposable income. Equity Release is however not suitable for all retirees and people need to consider all their options and alternatives in association with their financial adviser before choosing this route.”
