- There were 36,050 new loans to borrowers aged over 55 in the first three months of this year – down 4.8% in a year (source: Later Life Mortgage Lending | UK Finance)
- There were 5,300 new lifetime mortgages (one type of equity release) down 8% in a year
- Retirement interest-only mortgages were up 5.4% in a year, but it’s still a niche market, with just 353 loans
- How fewer mortgage approvals could affect people’s finances
Sarah Coles, head of personal finance at AJ Bell, comments:
“Rising interest rates are putting later life borrowers off. For some, this puts life milestones like buying a house on hold, while for others it raises serious questions about where they’re turning for the money instead.
“The number of people over the age of 55 who are borrowing against the value of their home has fallen. Higher interest rates shoulder much of the responsibility. For those trying to buy at this age – possibly after divorce – the cost of property and sky-high monthly payments may be standing in the way of them rebuilding their finances and scuppering their chance to be mortgage-free in retirement.
“Older people who are still in work will also be thinking twice before remortgaging to free up cash. Dipping into the equity of your home to support adult offspring or cover one-off expenses feels less attractive when you’re paying handsomely for the privilege. This may be a highly sensible decision if they are able to cut their costs or forgo the spending it would have covered. However, if they still need the money, there’s a risk they’re looking elsewhere for additional cash.
“If they’re dipping into their pension before retirement, it’s vital to calculate the impact on the income they’ll get from their remaining pension pot. The recent Pensions Commission report showed that 43% of people are under-saving for retirement, but that rises five percentage points – to include an extra 2 million people – if you assume they spend even just their 25% tax free lump sum.
“Once people have retired, the slowdown in equity release is unlikely to be an indication that pensioners are simply better off. For those on a low, fixed income, there’s a real risk that a reluctance to use the value in their property could be impacting their standard of living.”
