Rising number of people turn to equity release amidst mortgage rate crisis

There is a rising number of people who are turning to equity release amidst mortgage rate crisis, according to new research.

Key points from research:

• • 55Plus receives influx of enquiries
  • Canada Life release new figures, nearly half used for remortgaging
  • Case Study: 70-year-old man, nearly lost his family home

The Bank of England said this month that mortgage payments will rise by at least £500 a month for nearly one million households between the end of this year and 2026 (according to the Financial Stability Report by the Bank of England), saying that many mortgage holders “may struggle with repayments” on loans. Mortgage stress is hitting levels last seen in the 80s, as nearly a third of borrowers aged over 55 fear the cost-of-living crisis will hinder their ability to repay their mortgage, with 3.3 million over 55s who have yet to repay their mortgage, according to new research (according to Key Market Monitor). However, many homeowners over 55 are unaware of the options available to them, which include Equity Release.

55Plus, the independent equity release specialist, said equity release cases across the industry have rapidly increased this year, as homeowners over 55 look for solutions to combat rising residential mortgage rates. The national company, which has expertise in all aspects of equity release, has witnessed an increase in enquiries from people looking to remortgage, as a direct result.

Jan Johnson, Founder and Director of 55Plus, said:

“After more than a decade of residential rates at 0.75% or below, this has left many homeowners whose fixed deals are ending, and those on tracker mortgages, facing huge blows to their finances and even losing their homes as a result. We urge all homeowners over 55 to look at all options available to them.

“Expectations that borrowing costs might rise even further has pushed up mortgage rates.

“This month, the average residential rate on a two-year fixed deal hit a 15 year high of 6.66%.”

New figures, obtained by 55Plus, from financial services provider Canada Life, revealed that nearly half (44%) of all equity release applications were to remortgage from January to March 2023.

Steven Scales, Proposition Director, Home Finance, Canada Life, said:

“With rising interest rates, coupled with a prolonged cost of living crisis, some homeowners reaching the end of fixed deals or on variable rates are facing repossession or being forced to sell up.

“In today’s unpredictable economic environment, equity release can offer peace of mind and certainty for homeowners aged 55 and over, especially given the rise in house prices in the last few years.

“Whether you are being confronted by the possibility of repossession, or simply want to free up some cash from your home, it is worth speaking to an independent financial adviser to understand your options.”

Equity Release gives flexible repayment options, whereby you have the choice to either pay nothing at all towards the debt or overpay the interest if or when you prefer. This has made it popular with people over 55 looking to release the value from their homes to support necessary costs without selling, with the assurance that they can remain in their house until they pass away, move into long term care or the property is eventually sold.

Equity release case study:

Mr. Philip Jenner, a retired 70-year-old from Quedgeley, Gloucestershire, was facing repossession of his three-bed family home, due to the rates increase, and had a 51-year-old wife and 11-year-old daughter to protect.

Philip had taken out a mortgage with Barclays in 2010 and was struggling to make the repayments since January 2023, with an outstanding balance of £60,000.  He had spent all his savings on acquiring the house and had no other financial support. At an interest rate of 6.77pc, his repayments were due to jump from £533 to £1,666 a month. This included a repayment plan to Taylor Wimpey, the developer, who he had fallen short on repayments for. Jenner was keen to extend the term on the mortgage with Barclays to reduce the tripling payments, but Barclays informed him that he would have to buy out Taylor Wimpey first to do this.

To make matters worse he was turned down by the main equity release brokers. However, he was then put in touch with 55Plus adviser, Ian Akeroyd, who completed the a scheme in July this year.

A total of £65,000 was released, paying off the remaining interest with Barclays, allowing Mr Jenner to be free of mortgage payments and remain in the family home. He was given the flexibility to pay as much or nothing at all for the next 15 years, giving him the breathing space needed.

Mr. Jenner said:

“I feel the banks are not pulling their weight to help with the mortgage rate crisis.

“I know they’re not charities, but some support would have been appreciated.

“I was in tears on many occasion and could not see a way forward.”

“There are many like me, who have found themselves in a difficult position, with many brokers turning us down due to being in complicated situations.

“I was very lucky to have found Mr. Akeroyd at 55Plus, who spent considerable time working out what was best suited in my circumstances.”

Kindly shared by 55Plus

Main article photo courtesy of Pixabay