Borrowing into your retirement
By 2050, population figures show there will be over eight million people aged 80 or above in the UK, which is more than double today’s figure.1 Improved lifestyle and healthcare, particularly for those aged over 65, is the main reason for the continual increase in life expectancy, in the UK.2
The subsequent change in population structure is likely to have implications for the mortgage market. Changes in the profile of borrowers have already become apparent. For example, the number of borrowers in their 70s taking out mortgages has jumped by 75 per cent, to 16,000, in the past five years.3Clients looking to borrow in later life may find themselves making mortgage payments into their retirement, and therefore using their pensions and assets as repayment methods instead of income.
The baby boom generation, born immediately after the Second World War, is now reaching retirement age. Due to the nationwide increase in life expectancy, this generation may be more likely to remain active in the mortgage market into their retirement, than previous generations. This means that a larger wave of borrowers looking for lending in later life may soon enter the mortgage market. As a result we have seen more mortgage products become available for some older borrowers, in particular, those with sufficient assets.
Why might you choose to borrow in later life?
There are a number of reasons why individuals nearing, or of pension age, may look to take out a mortgage.
For some, although selling their property and down sizing to a smaller one is an option, many will wish to stay in their current home in retirement or move to another property of a similar size. However, this can be a challenge, partly as a result of the fact that there are few houses on the market suitable for older people who do not wish to downsize, after their children have flown the nest4. Some borrowers may therefore, wish to secure a mortgage product that allows them to fund improvements on their current home instead.
Alternatively, they may find an ideal property at home or abroad, and are looking to purchase it as a new home, in which to spend their retirement. In these cases a mortgage can be taken out in order to give them sufficient liquidity to help achieve this.
Another potential reason is that with the equity tied up in their home, older family members may wish to support younger family members; either to get onto the housing ladder or help with school or university fees. A mortgage can be taken out on their property, as long as it is suitable to their circumstances, which allows them to release some of this equity.
The number of maturing interest-only mortgages is set to grow over coming years5. Some older borrowers, with this type of mortgage, may be looking to pay this loan off by remortgaging. As an older borrower there is more opportunity to demonstrate good spending habits through a longer credit history. Some lenders prefer this as they are more likely to meet the the lender’s affordability criteria and be suitable for a mortgage6.
We have extensive experience in assisting clients with complex circumstances, to arrange their mortgages. We have unlimited access to the market and strong relationships with a range of private banks and niche lenders, which means that we may be able to help you where others cannot.
Click here to read our case study on how we secured funding of £1.7 million, for clients in their late 60s, who wanted to remortgage.
If you are nearing or over the age of 60 and would like to know which mortgage products might be available to you, call us on 020 7519 4985 or send us an email to find out more. One of our specialist Mortgage Managers would be happy to talk through your options with you.
Your home or property may be repossessed if you do not keep up the repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you re-mortgage.