83% of over 55s struggle to renew their mortgage
According to a recent study from Retirement Mortgage Service, a mortgage broker, 8/10 borrowers over the ages of 55 are struggling to renew their mortgages and find a product that suits them.
The study claims that approximately 30,000 retired homeowners contacted their mortgage advisors in the past year regarding the possibility of refinancing their home.
2,540 of these proceeded to a full remortgage application.
But – of these – only 438 were able to refinance onto another mortgage product that would fit their requirements: a retirement interest-only mortgage (lifetime mortgage).
This means that only 83% of borrowers were able to secure the mortgage product that fit their needs, leaving them at the mercy of their current lenders (often unattractive) standard variable rate, which automatically comes into effect at the end of a fixed-term mortgage.
Why is this?
Some mortgage lenders impose age restrictions on who they will lend to and which age groups can have access to certain mortgage products.
The stipulating factor is what age the borrower will be when the mortgage term they are applying for will end. The older they are, the less time they may have to successfully pay off their mortgage.
This is posing a challenge for people over the age of 55 looking to refinance their homes, as Steve Wilks (from Responsible Life) states that,
“Retirees are being frozen our of the mortgage market because they are being sabotaged by affordability rules that are not fit for purpose. The interaction between products and their features in the later life lending market must be urgently addressed if they are to meet societal needs. The country would feel a net benefit from improvement in these areas”.
So, what are the other options?
In the past, those in this situation could either just stay put, or make a move to a smaller home should they have enough equity in their current home to make a cash purchase.
However, nowadays there are more options available to this group, including:
- Equity release: this is a method of gaining capital by obtaining capital against the house whilst continuing to live there. It can be an attractive option for those who need access to quick capital, which can be paid in a lump sum if necessary
- Interest Only Mortgages for retirement: Only a few years old, these are a cheaper alternative to equity release and effectively does what it says on the tin. Those who undertake this type of retirement mortgage will only make interest payments
What should I do?
If this is your situation, the best thing you can do is get on the phone to an advisor – ideally, a specialist.
Once they know your situation, they can use their expertise to advise you as to what is the best option for you.