Half Mortgage Borrowers Still In Debt After Retirement As Equity Release Takes Off

Almost half of new UK mortgages are being made to borrowers who will not have paid off their loans by age 65, according to the trade association, UK Finance.

Longer and lifetime mortgages are part of a growing trend towards people ending their lives in debt to the banks. This compares to a third of borrowers in 2014.

Lifetime mortgages or equity release have become more popular in the last decade after soaring property values have encouraged people seek to pull cash from their homes. More lenders have entered the market and advertise heavily on daytime TV.

Equity release loans can be used to help provide children and grandchildren with a deposit on their first home, supplement pensions or mitigate inheritance tax by reducing the value of the estate left on death.

As a former financial adviser, I met people who lived in mortgage-free valuable homes which they could not afford to maintain or heat.

I also met borrowers who did not know the difference between an interest-only and repayment mortgage. They did not realise that their loan would not be paid off and that they were only paying interest and not capital.

Lenders can demand full repayment of the loan at the end of the mortgage and are not obliged to extend the term.

You should get independent advice if you are interested in releasing equity – borrowing - from your home.

The Bank of England has held base interest rates at 0.1% despite forecasting 4% inflation by the year end. However, the market expects rates to rise in early 2022.

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