More 2 Life research has indicated that 41% of over 65 year olds with a mortgage are on an interest-only product.
Of these borrowers, almost four in 10 are 65-74 year olds and 56% are over 75 years old. Individuals who do not have a separate savings vehicle to pay off the capital lump sum due at the end of the term on their interest-only mortgage could find themselves facing a funding crisis in retirement.
The equity release lender’s findings also show that growth in average unsecured debt levels for over 75s was higher than for any other age group, further highlighting the growing problem of retirees being saddled with debt later in life.
For the 75-84 age group, average unsecured debt rose from £162 in 2006-2008 to £487 in 2012-2014, equivalent to an increase of 201%, whilst for the over-85 age group, debt levels rose from £36 to £115 over the same time periods, resulting in a 218% increase.
Dave Harris, managing director at More 2 Life, said: “This new research shows that the number of interest-only mortgages among older homeowners will continue to be an issue as these begin to mature in the next decade. Demand for alternative later life lending on this scale has the potential to double the equity release market this year alone. For many of these individuals without an alternative capital repayment strategy, retirement lending and in particular lifetime mortgages will be the solution to their finances.
“For advisers, these borrowers represent an area of the market that needs advice on what to do as their mortgages near maturity. Advisers will be crucial in identifying if equity release can help their clients and this is an opportunity for them to expand their offering to clients.
“If advisers don’t feel comfortable in taking on the case, then they can refer them to an equity release specialist to ensure they get the help they need and will be beneficial for all parties involved.
“The interest-only issue is not going to go away and as our research shows advisers and lenders need to work together in the interests of our sector and our customers.”