Has your mortgage deal come to an end?
In this week’s mortgage round-up we’re looking at how April is huge month for remortgages, the rise in last-time buyers and the failure of retirement mortgages.
Thousands of homeowners should be on the hunt for a new mortgage. The number of discounted deals that come to an end this month are worth a total £22.3bn – double the figure for March. If these people don’t act fast and remortgage they will be automatically moved onto their lender’s standard variable rate (SVR). This will mean they face a sharp increase in their monthly repayments and the total amount of interest they pay.
The typical SVR is currently 4.25%. In contrast the average remortgage rate is 1.93%, says Anne Ashworth in The Times. Someone with a £400,000 mortgage on that SVR would be paying £485 a month more than they need to, costing them £5,796 over a year.
Last-time buyer numbers double
The number of ‘last-time buyers’ (LTBs) has almost doubled over the past decade. One in three – or almost 200,000 – buyers are over 55, according to data from the Intermediary Mortgage Lenders Association (IMLA).
This group are increasingly using cash to buy their perfect forever home. Most older homeowners own their property outright. As a result, they own a disproportionate share of housing equity – £1.8tr of a total £2.6tr.
But, older homeowners aren’t staying in their family home once they have cleared their mortgage. An increasing number are choosing to make one final move into a home to see them through the rest of their life.
“Our increased life expectancy and growing number of people aged 55+ means that, far from being a niche sector, the number of LTBs in England has doubled within a decade,” says Kate Davies, executive director of the IMLA. “It’s clear that there is much appetite among older homeowners to move into a property better geared to their needs in later life.”
The problem for older homebuyers is builders are proving slow to catch on to this growing trend.
“It is curious that house-builders appear to have been slow to recognise what could be a sizeable market for a variety of designs that combine practicality, low maintenance and energy efficiency,” says Davies. “Retirement developments aimed at senior citizens have their place, but they’re not appropriate for everyone.
Are retirement interest-only mortgages a flop?
Retirement interest-only mortgages were launched last year. They can help older homeowners stay in their home for longer and not be trapped on high interest rates.
A retirement interest-only mortgage is very similar to a standard interest-only mortgage. You borrow a lump sum then only repay the interest each month. The difference is that the capital borrowed doesn’t have to be paid by a set date. Instead, it is settled when the property is sold, the homeowners dies or they go into full-time care.
The problem is that just 112 retirement-interest only mortgages have been taken out over the past year.
“This is despite some 185,370 retirees potentially facing losing their home as their interest-only mortgages mature,” says Will Kirkman on This is Money.
But, it could be that these mortgages were just slow to take off with few lenders offering them initially. Between July and September just 14 retirement interest-only mortgages applications were completed. In the final three months of the year that figure jumped to 98.
There are now 12 different lenders offering retirement interest-only mortgages.