Interest-only (IO) mortgage borrowers aged 45 plus are being warned they may face difficulties when remortgaging.
Interest-only (IO) mortgage borrowers aged 45 plus are being warned they may face difficulties when remortgaging.
A report by Moody’s Investor Service has found that when older borrowers come to refinance their IO products at maturity, options will be limited because many banks are reluctant to lend to people in their retirement.
Analysis discovered only 15% of borrowers who waited until maturity would be able to switch to a repayment mortgage and 76% would have limited refinancing options.
People in the 45 to 65 age bracket were at most risk, with the fewest remortgaging options, Moody’s said.
However, report analysts have suggested equity release may be a good option for some. Moody’s report said as many as 80% of borrowers at loan maturity are eligible for equity release products, which could finance up to 50% of their outstanding balances.
Greg Davies, assistant vice president and research analyst at Moody’s said: “Interest-only borrowers currently in the 45 to 65 years old bracket have the fewest refinancing options.”
He added: “At maturity, they will have very limited options to switch to either an equity release or amortising (repayment) product and will be heavily reliant on significant, prior house price growth to fully finance their outstanding loan balances.”
Moody’s pointed out equity release products are subject to limitations – such as affordability, house-price inflation and product availability.
In places such as the South East of England where house price growth has outpaced other regions, borrowers’ chances of eligibility might be more positive.
