Over-55s most at risk from interest only ‘time-bomb’
The over-55s are most at risk from the interest-only mortgage time-bomb, according to equity release specialists.
This fresh warning comes in response to a long-awaited review into interest-only mortgages published today by the Financial Conduct Authority.
It found almost 300,000 borrowers with loans maturing before 2020 face a shortfall in repaying their interest-only mortgage. Of those 300,000 borrowers, around 100,000 will have a shortfall of £50,000 or greater.
Key Retirement Solutions managing director Dean Mirfin warns: “Those most at risk are the over-55s as this is very much a retirement income crisis.”
However he added: “There is time to address the crisis and there are solutions already available ranging from downsizing your home to considering switching to an equity release lifetime mortgage which enables them either to continue paying interest or have interest roll up while escaping the looming repayment date.”
The FCA’s research found while 90% of people currently have a strategy to repay their mortgage, 10% or around 260,000 people do not. Those expecting a shortfall say they will use savings (21%) or downsize (19%) to pay off their mortgage, while 15% intend to remortgage.
Age Partnership’s technical manager-equity release Simon Chalk predicts future pensioners’ inability to pay off interest-only mortgages will lead to a ‘surge’ in equity release.
Chalk said: “The equity release sector is well placed to extend a helping hand to the tens of thousands of borrowers, stricken with worry over how and when they can eventually repay their mortgage. We now call on banks and building societies to work with us in developing products or channels for signposting their borrowers to appropriately qualified equity release advice.”