Interest-only mortgage maturities would be a ‘game-changer’

It has recently been reported that the hundreds of thousands of interest-only mortgage maturities due over the next few years will be a ‘game-changer’ for the industry.

As outlined recently in the FT Adviser. while not all lenders and brokers wanted to put a figure on expected growth, the flood in 2017 is set to “turbo-charge” the equity release market, with one provider predicting demand could more than double over the year.

Luckily, at Poole Townsend, we as a firm have not one but two qualified equity release specialists AND an accredited later life advisor all working for us. Pretty unique, we’d say!

The Financial Conduct Authority has highlighted 2017 to 2018 as the first year in which a large number of the interest-only mortgages sold in the 1990s and 2000s would reach maturity. The FCA has estimated almost half of those with interest-only mortgages would not be able to repay their loan in full. Of those, 50 per cent would have a shortfall of more than £50,000. Anticipating potential defaults, four years ago the FCA requested lenders to contact their customers to warn them of their upcoming repayment date.

Stuart Wilson, channel marketing director of equity release lender More 2 Life, said of the 64,000 interest-only mortgage loans due to mature this year, 40,000 belonged to people over the age of 65. That, he estimated, accounted for £3bn of debt. Given standard mortgage providers’ reluctance to lend to those aged 65 plus, he said for those who cannot pay back the loan in full, and are unable or unwilling to downsize, equity release would be the logical solution. He said the amount flowing into equity release “could be bigger than the entire equity release market now”, which currently stands at just in excess of £2bn a year.

While saying people should first consider downsizing, he pointed out that in practice retirees preferred to remain in their home, often for emotional reasons. According to Key Retirement, the average mortgage debt for those releasing equity is £81,000, costing borrowers £412 a month in interest.

If this affects you and you feel you need to speak to somebody about equity release, we have two specialists and an accredited later life advisor all ready to give advice. Please don’t hesitate to get in touch with us to discuss further.

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