If they have not been setting aside money to repay at term end – in the past brokers and lenders did not insist on a repayment vehicle as they do now – what can they do?
Just because their original lender will not allow them to extend their mortgage or take out another one, it doesn’t mean other lenders won’t oblige.
If borrowers have had their mortgage for 25 years, which was a common term in the 1990s and early 2000s, many of them will be over 50 when the mortgage comes to the end of its term.
Some will be much older but unfortunately, many borrowers often think they can’t get a new mortgage because of their age – but that is not necessarily correct.
From research we have carried out, 57 per cent of borrowers over 50 believed it was more difficult to obtain a mortgage. They feel they’re being ignored and no one will help them or point them in the right direction to access finance.
Opportunity for brokers to outline options
But this is a huge opportunity for brokers to explain to clients that there are options which mean they don’t have to sell up, downsize, move miles away from family and friends or in the worst case, have their property repossessed.
For people in this situation, it is highly likely that the property will have risen in value, quite substantially depending on the region. Using average house price data from Office for National Statistics, in April 1997 a home cost £61,946 but 25 years later in April 2022 that has increased to £281,161 – a rise of 354 per cent.
If the borrower has been able to pay the mortgage each month for 25 years, they are likely to be able to pay it going forward. Even if they are retired, they will have retirement income and may have other assets such as investments, which we can use in our affordability calculation.
Long-term fixed rates increasingly popular
We know that many borrowers are concerned about the cost-of-living crisis. One potential solution is to consider a long-term fixed rate mortgage in today’s rising interest rate environment.
With some retirement interest-only (RIO) mortgages there is the option of fixing the interest rate for life so there is no set date to redeem the loan. Repayment of the mortgage can be at any time including up until the borrower passes away or moves into care.
With more interest-only mortgages due to mature, we encourage brokers to tap into this market and ensure borrowers are given options so they can stay in their home by taking on a new interest-only mortgage.
