Interest-only borrowers turn to equity release
An increasing number of borrowers with an interest-only mortgage are opting to release equity from their property to help repay their mortgage debt
The number of interest-only borrowers who turned to equity release as a solution for their debt rose by a massive 68% last year, according to a new study by Age Partnership.
In 2014 1,605 interest-only borrowers took the option of equity release, which rocketed to 2,697 in 2015.
And the retirement income specialist points out that this market is set to grow hugely, as the interest-only time bomb ticks ever more urgently. It says that 720,000 interest-only mortgages are set to mature by 2020, with half unlikely to have a repayment plan in place.
In 2015, the average customer had £66,035 in outstanding debt from their interest-only mortgage, a fifth up on 2014. They also released 10% more equity with an average of £76,810, up from £69,617 in 2014.
The average customer using equity release to pay down their interest-only mortgage was 70 years old in 2015, a year older than in 2014.
Simon Chalk, equity release expert at Age Partnership, said: “We have not only seen a burst of over-55s turning to equity release, such as lifetime mortgages, as the impending maturity of their interest-only mortgage looms, but we are also seeing more customers with higher levels of non-mortgage debt. These factors – individually or combined – present a significant concern and reflect the need for a review of the market with a focus on the older borrower who is unable to go down the more traditional route of remortgaging.”