Many homeowners aged 55 and over are facing the prospect of returning to working so they can afford rising mortgage repayments.
This is according to a survey by Key which revealed four out of five over-55s were concerned about affording new repayments once their current fixed rate deals ends.
The research found one in five households would face the consequences of rising mortgage rates in the next year when their current deals were due to run out. This equates to around 316,000 households nationwide.
According to the Office for National Statistics most fixed rate deals ending in 2023 were set below 2%. But some borrowers are now facing a 5.65% (two-year fix) jump in rates when they remortgage.
Key’s study found as many as 70% of over-55s are on fixed-rate mortgages with an average two years left to run on the deal. It suggests, unless rates have come down drastically by 2024, borrowers may still be facing hard choices.
In fact, 23% of over-55s said they may have to return to work or work longer hours in order to afford a higher fixed rate deal.
Around one in five were worried they may go into arrears on their mortgage as a result of rate rises while 17% said they may have to downsize or sell their home to meet repayments.
Whilst a quarter of those quizzed said they were confident they would be accepted for the best possible rate for their situation when their deal ended, around 15% said they would move their lender’s Standard Variable Rate (SVR) and then look for a better rate when the market environment changed.
‘The era of low mortgages is over’
Will Hale CEO at Key said: “Most over-55s with mortgages have been protected from the impact of the Bank of England’s series of rate rises as they have been on fixed rate deals with many paying less than 2%.
“Unfortunately, that era of low mortgage rates is over. Many older homeowners are now heading for steep increases in their monthly repayments and, particularly given the continuing increases in other cost of living expenses, worries about being unable to afford higher rates are growing.
“Managing an increase of 5.65% when moving from one two-year fix rate mortgage to another or seeing an even larger 6.65% jump when you move to your lender’s standard variable rate is understandably frightening.
“However, there are things that can be done – provided you take the time to consider what you need ahead of time rather than waiting until you are forced to remortgage and pushed into a rushed decision.”
Hale suggests over-55s get advice in the run up to their deal ending to help understand their options. This could include a retirement interest-only mortgage or equity release if suitable.
“Taking the time to get specialist advice will pay off in the future and help customers to manage the rate shock,” he added.
