Concerns have been voiced over the number of elderly people sitting on large amounts of mortgage debt, at risk from losing their homes.
A report by Bristol University and the International Longevity Centre (ILC-UK) found that about two-fifths (40%) of people aged 75 and over and who still have a mortgage to pay off have an interest only mortgage with no linked investment with which to pay their loan back. This figure dropped to just 6% for people aged between 50 and 54.
Interest-only mortgages, which allow borrowers to pay off the capital only when the mortgage term ends, have become much more thin on the ground since the boom years amid concerns about people not being able to pay back their debt.
Earlier this year, the Financial Conduct Authority (FCA) found that home owners have been failing to put enough money aside on up to half of the 2.6 million interest-only mortgages which are due for repayment over the next 30 years.
Mortgage lenders recently agreed to alert their most at-risk customers to help them avoid ” payment shocks”. Some borrowers could end up having to sell their home to pay the loan back if they do not take stronger control of their repayment planning.
The Bristol University/ILC-UK research found that nearly one in 10 (9%) households headed by someone aged in their late 60s still had a mortgage to pay off, as did one in 50 (2%) of people aged over 80.
Among everyone aged over 50 with an outstanding mortgage, the average amount still owed was £62,200. Among the over 75s, the average amount outstanding was £30,900.
At least 14% of older mortgaged households had taken on a new home loan or extended their mortgage in the last couple of years, the report found.
The research was based on the Office for National Statistics’ Wealth and Assets Survey, which looked at the economic wellbeing of households.
Peter Tutton, head of policy at StepChange Debt Charity, said: “Today’s report further highlights the potentially serious problems faced by older people with interest only mortgages.
“It is now essential that lenders show forbearance and work with customers to establish suitable options to prevent people from losing their homes in retirement.”
Andrea Finney of Bristol University’s Personal Finance Research Centre, said: “These new findings highlight a core of households whose mortgages have persisted into older age.”
She said the report raises important questions about the financial security of these households as they approach later life.
David Sinclair, assistant director of policy and communications at ILC-UK said: “We are seeing a worrying picture emerge of older people with unlinked interest only mortgages.
“As the FCA and industry communicates with people with unlinked interest only mortgages, it should evaluate whether any specific targeting of information and advice is necessary for older people.”