Is the New Trend to Have a Mortgage Stretching into Retirement?September 25th, 2013
There was a time when having a mortgage in retirement was considered inappropriate, even taboo! And if you happen to have a mortgage during retirement, it was certainly not something you’d discuss with just anyone. But how times have changed!
Today, more people than ever are left with no choice but to carry their mortgage into retirement. While lifetime mortgages such as the Stonehaven Interest Select mortgage are in very short supply, some lenders do allow mortgages to be continued beyond the age of 70 years, or even upto 80 years provided all their conditions are met.
This drastic change in peoples’ attitudes towards retirement borrowing has been brought about by several factors. Changing spending habits and attitudes towards debts mean that people are more comfortable with loans in general. The fact is that many people are left with little choice and are unable to repay their mortgages in time due to tough financial conditions.
Studies have shown that the average balance on a mortgage by the time a homeowner reaches retirement is a whopping £52,500. Increasing house prices, current inflation levels and low wage inflation means that first time buyers are able to get onto the property ladder much later than ever before. All these factors contribute to the fact that more and more people have to extend their mortgages or remortgage their house into retirement.
The societal view towards large debts is changing, as is the general attitude towards leaving an estate behind for beneficiaries. An increasing number of homeowners are comfortable servicing the debt throughout life without actually having to repay the loan. Interest only mortgages like the Halifax interest only lifetime mortgage allow you to make monthly interest payments while the balance on the mortgage remains the same. Lifetime mortgages can be continued until you die. Income during retirement is also decreasing as welfare budgets are slashed and inflation rises. Reducing incomes means that for many a roll up equity release is the way to go.
While the trend for carrying mortgages into retirement seems to be becoming stronger, the FSA has clamped down on interest only lending to pensioners. Tough regulations and pressure from regulatory bodies was one of the reasons the Halifax Retirement Home Plan mortgage was withdrawn in August 2011. Alternatives do exist, but the fact is that even as the need for innovative retirement solutions is increasing, there is a marked lack of mortgage options for pensioners.