An analysis by More 2 Life, equity release lender, reveals that over 1.3 million people above 55 years of age are continuing to pay their mortgage and 289,000 people above 65 years of age owe money on the home loan that they have taken.
More 2 Life’s analysis found out that 18% of the owner occupiers aged 55 years above in the households in Wales and England are yet to pay off their mortgages. This is indicative of the growing risk of individuals taking high levels of debt into their retirement.
According to the research, out of the 4.34 million households belonging to people of 65 years and above, 289,000 households, or 6% of all households, are continuing to pay their mortgage. On the other hand, among 2.77 million households belonging to people in the age group 55 to 64 years, approximately 37% have to clear off their mortgages.
This analysis of More 2 Life comes in following a separate research by the Moodys, a rating agency, which estimated that as many as 52,000 borrowers aged 60 years and above have interest-only mortgages with equity of less than 20% in their house.
The equity release lender believes that it is essential to provide focused solutions to retired people who continue to carry mortgage debt. They offer their own Choice Plan to help borrowers change over to a 6.08% equity release lifetime mortgage.
More 2 Life’s data shows that as many as 4 out of 5 of their customers who buy the plan use the money to pay off mortgage balances ahead of the repayment date fixed and switch over to a lifetime mortgage without any fixed date of repayment.
These findings put pressure on the Financial Services Authority to pressurize lenders for issuing warning letters to their customers on the same model as that of the endowments scheme – Red, Amber and Green letters.
More 2 Life Managing Director Jon King said that retired homeowners who are still repaying their mortgages are in a dangerous situation. This may not be an issue for many, but for a substantial number of people who are on interest-only deals will have to repay the borrowed money by the specified repayment date. What is worrying is that many are waiting hoping for the best to happen. If lenders send warning letters regularly, if will help them to focus on the issue at hand. Lenders themselves acknowledge the seriousness of the issue and are concerned about it.