Mortgage: End-of-life borrowers will be “hardest hit” by rising interest rates | Personal finance | Finance
With a growing housing market slump, more and more people over 50 are likely to drag out mortgage payments until retirement. End-of-life lender specialist Leon Diamond has shared what he thinks is an ideal answer for this age group.
The cost of living crisis is squeezing the finances of those moving ever closer to legal retirement age as they desperately try to save every penny for retirement.
Added to a growing number of people taking on their mortgage debt in retirement, this could become a perfect storm for financial ruin.
Mr. Diamond, CEO of LiveMore Capital, shared: “Over 50s are seeing a huge impact on their finances, especially when it comes to their mortgages. As interest rates rise due to inflation, older borrowers who pay a standard variable rate on their mortgage will be hardest hit.
Mr. Diamond specializes in clients who are borrowing money much later in life than they planned or are still paying off debts, which he has referred to as “mortgage prisoners”.
He added: “This term refers to clients who are sitting on high variable rate mortgages who have no repayment strategy with their current mortgage lender or cannot remortgage. For people in this situation, there are very few alternatives other than downsizing their property or choosing equity release, which is not always the appropriate option.
“Furthermore, end-of-life borrowers are generally underserved by street lenders. In fact, over 30% of our customers have reached the end of their mortgage and were struggling to find a solution until they discovered LiveMore.
LiveMore research indicates that more than 30% of people over 50 pay a mortgage at a standard variable rate, which they could set to save their retirement funds.
Mr. Diamond explained, “Being able to fix rates for more than five years, especially during a period of inflation, is extremely important to help with cash flow planning. Long-term fixed rate mortgages are therefore a solution to keep your finances under control, so that individuals are not sensitive to rising interest rates.
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He also noted that the over-50 market is “underserved”, which is why LiveMore specializes in providing “an opportunity for older people to stay in the properties they call home. for themselves and their families.
The undeservedness of this market proves how murky the current situation is, as many people still believe they should own their property before they retire, but every year fewer Brits manage to achieve this goal.
The average age to pay off a mortgage has been reported to be 59, yet a third of millennials expect to never be able to buy their own home.
Housing affordability is becoming a concern for many young people, with the idea of retiring as a homeowner becoming a fictional idea for many.
The Office for National Statistics said almost three quarters of English residents aged 65 and over own their own home.
Already, these statistics show a massive change from just 20 years ago, but moving forward will likely see the situation worsen.
In 1997 around two-thirds of Britons aged 30-40 had a mortgage, but by 2017 that figure had already fallen to half of people in that age group.
This age group is now three times more likely to rent than 20 years ago, a trend that will likely continue into their senior years.
The ONS noted that this shift in housing tenure will not only alter retiree markets and finances, but will also potentially impact the lifestyle of those retiring in the decades to come. to come.
This is the dilemma of Generation Rent, which describes young adults between the ages of around 18 and 40 who have been excluded from the housing market.
Their inability to buy property at the same age as their parents has not only affected the way they plan for the future, but also sees these people paying a higher percentage of their income to rent for a much longer period than expected.
This means they will have to save much longer than their parents to buy property, leading to more Britons paying off their mortgages with retirement income.