A study from Key found that a fifth were ‘extremely concerned’ about paying a higher rate on their mortgage. According to the Office for National Statistics (ONS) most fixed rate deals ending this year were priced below two per cent and borrowers face a jump to 6.85 per cent when refinancing.
However, Key’s research found that 70 per cent of mortgagors 55 and over had around two years left on their deals, meaning rates would need to fall by 2024 to avoid a significant rate jump.
Coping strategies
The study found that 23 per cent of over 55s were prepared to go back to work or take on extra hours to afford a higher rate deal.
More than a fifth, 22 per cent, said they would not be able to manage a rate higher than six per cent.
A fifth said they could go into arrears due to higher rates while 21 per cent refused to think about their financial situation. Some 17 per cent considered downsizing or selling their home to afford repayments.
On refinancing, 23 per cent felt confident they would get the best possible rate for their circumstances while a quarter hoped this would be the case.
Some 15 per cent planned to go on to the standard variable rate (SVR) then look for a better deal as the market changes, and seven per cent said they would be fine to stay on the SVR. A tenth said they would not seek advice and just take what their lender offered them.
Era of low rates is over
Will Hale, CEO at Key, said: “Most over-55s with mortgages have been protected from the impact of the Bank of England’s series of rate rises as they have been on fixed rate deals with many paying less than two per cent. Unfortunately, that era of low mortgage rates is over.
“Many older homeowners are now heading for steep increases in their monthly repayments and, particularly given the continuing increases in other cost of living expenses, worries about being unable to afford higher rates are growing.”
He added: “Managing an increase of 5.65 per cent when moving from one two-year fixed rate mortgage to another or seeing an even larger 6.65 per cent jump when you move to your lender’s standard variable rate is understandably frightening.
“However, there are things that can be done – provided you take the time to consider what you need ahead of time rather than waiting until you are forced to remortgage and pushed into a rushed decision.”
Hale said borrowers should speak to an adviser to explore their options.
“Taking the time to get specialist advice will pay off in the future and help customers manage the rate shock,” he added.
