Almost a third – 30% – of over-55s with a mortgage did not know what would happen with their monthly payments after their fixed deal expired, according to a poll from Key Later Life Finance.
A further 13% said they were worried they would slip into arrears as they approached retirement.
The best two-year fixed rate currently on the market is 4.54%, while the cheapest three-year fixed rate is 4.49%, according to Moneyfacts.
A financial squeeze for over-55s
Key’s research found that over-55s were paying £700 per month on their mortgage repayments on average, with this accounting for around a fifth of their monthly outgoings.
Some 15% said their payments accounted for 30% or more of their monthly expenses, and 11% said their mortgage obligation cost them £1,500 or more each month.
Respondents said they were trying to limit increases to their monthly payments where possible, with a fifth seeking advice to reduce outgoings. A quarter said they had spoken with their current lender about reducing payments.
Additionally, 57% of respondents who were expecting to continue paying a mortgage said they had made cutbacks and would have to curb spending. Some 18% said they were having to work for longer than planned.
Open to other options
Key found that over-55s were aware of the options available to them, with 44% saying they had knowledge of the later life options on the market. Some 36% said they were interested in payment-term lifetime mortgages (PTLMs), while 6% were very interested.
Key recently launched a PTLM to support homeowners coming to the end of their deal and facing higher repayments. The product allows partial interest repayments to lower monthly costs.
Borrowers have to commit to a period of mandatory payments, which lasts until the oldest applicant’s 66th birthday. These only have to be partial monthly interest payments.
Chris Bibby, managing director at Key, said: “Over-55s homeowners at the end of fixed rate deals are facing substantial increases [that] 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. For many, it will be impossible and something will have to give.”
He added: “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.
“There are options that may not be part of a mainstream lender’s portfolio that could provide a better outcome for many.”
Related: Three in five homeowners to use property wealth for later life expenses
