LoginSubscribe to Alerts

One in three over-55s still paying a mortgage

Posted 22 July 2016

Moving to a smaller home is a popular option for older homeowners but many do not own their home outright, with interest-only mortgages causing a headache...

If you are aged over 55 and you are still paying a mortgage, you are not alone. New research from a leading retirement lending solutions provider has found that more than one in three equity release customers are still paying off their home loan.

Many of these are seeking specialist advice because they have interest-only mortgages and the research highlights the growing need for specialist solutions for older customers.

Older borrowers facing repayment shortfalls on interest-only mortgages

New research from national specialist Bower Retirement Services has revealed that more than a third of equity release customers are still paying a mortgage. Its study found that 36% of over-55s seen by advisers are still paying home loans and that there has been a surge in enquiries from older borrowers with interest-only loans.

Interest-only loans were popular in the 2000s as borrowers sought to minimise their mortgage repayments. As no capital is being repaid as part of the monthly repayment, interest-only loans have to be paid back by another means such as an investment plan or, in some cases, the sale of the property.

Advisers are reporting an increase in customers who were seeking to pay off their interest-only loan by selling their home and moving to a cheaper property, but have decided not to go ahead. Almost a quarter of clients (23%) who looked at downsizing did not go ahead, with key reasons including staying near family and friends and not being able to find a suitable home.

Another problem that older borrowers have encountered is that their property is not worth as much as they thought when they came to downsize. Advisers say that just under a fifth (18%) of clients who went ahead with equity release found their house was valued at lower than they had expected.

"Much more needs to be done" for older borrowers

In recent months, Santander and Legal and General have launched a partnership to offer lifetime mortgages as an option to older borrowers who are facing the possibility of getting to the end of the term of an interest-only mortgage without the means to repay the whole loan.

Andrea Rozario, chief corporate officer at Bower Retirement Services, said: “The Legal & General and Santander deal is a significant move for the launch of retirement lending but much more needs to be done.

“Significant numbers of people aged over-55 are paying off mortgages but do not have the range of options they need. Downsizing will be appropriate for many but it is also clear that many want to stay in their existing home for emotional and financial reasons and should be able to do so as long as it is in their best interests.”


20 February 2024
Bromford is working with The Mortgage People to advise homebuyers about the best way to a successful mortgage application...Read more
2 February 2024
Ben Thompson, deputy CEO at Mortgage Advice Bureau, shares his top tips to consider before buying a home with a sibling or friend...Read more
31 August 2023
We guide you to ensure the process of buying a second home for yourself or family is as straightforward as possible...Read more
Sign up for email alertsGet the latest properties and updates sent directly to your inbox daily, weekly or immediately you are in control.
Subscribe to Alerts
Search news and advice
Individual savings and affordability may vary.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP PAYMENTS ON YOUR MORTGAGE.

If you choose to use Tembo for mortgage advice, we may earn a commission from them for the introduction. This does not negatively impact the amount you'll pay for their service.

Tembo Money Limited (12631312) is a company registered in England and Wales with its registered office at 18 Crucifix Lane, London, SE1 3JW. Tembo is authorised and regulated by the Financial Conduct Authority under the registration number 952652.

Click here to see your activities