“My bank told me I had to quadruple my mortgage payment or sell my house”
Those who suddenly got pushed around to fill the void turned to equity release. According to Key Later Life Finance, a financial planner, in the first three months of this year, 42% of buyout clients used the money to pay off a mortgage. This accounted for more than half of all equity-released loans – a jump from 45% during the same period in 2021 and the highest share on record.
Others have turned to specialty lenders who offer interest-only retirement mortgages. Mr Higginson and the Atkins were re-mortgaged via LiveMore, which began trading in October 2020. Their costs are higher than under their previous deals (Mr Higginson is now paying £500) but are cheaper than renting .
Leon Diamond, of the specialty lender, said: “We are likely to see a big increase in mortgage prisoners. This means customers are sitting on high variable rate mortgages but have no repayment strategy.
Homeowners with interest-only mortgages typically pay a standard variable rate, which means they’re particularly exposed to rising interest rates. “Over the next six to 12 months, we’re going to see missed payments and defaults in the market,” Diamond added.
David Hollingworth, of L&C mortgage brokers, said borrowers will be pressured as they should repay.
Many older homeowners are on interest-only deals sold before 2008, before post-crash regulations imposed tougher affordability controls and requirements for clear repayment plans, he said. declared.
The growth in house prices in the early 2000s prompted buyers to try to keep their mortgage costs low. “These borrowers face a real crisis later in life,” he added.
Alex Edmans of Saga Personal Finance, which caters to the over-50s, said: ‘A lot of people doze off in there and then wake up abruptly.
A Lloyds Banking Group spokesman said: ‘We are contacting our interest-only customers throughout the life of their mortgage to remind them of the importance of an appropriate method of repayment and to contact them if they have concerns. We have a team of colleagues who are dedicated to finding solutions for anyone who needs extra help. »