According to quarterly research from LV=, which surveyed around 4,000 people, one in 10 retirees had mortgage debt when they retired with the average mortgage debt outstanding at retirement at £38,000.
The report added 63 per cent of those who retired with outstanding mortgage debt had to pay the mortgage debt with their pension.
However, LV= found that only 28 per cent of homeowners would consider a lifetime mortgage and only three per cent said they already had a lifetime mortgage.
Approximately 31 per cent of those who would consider a lifetime mortgage said they would more likely due to current economic conditions, which grows to 45 per cent for those with a household income of £100,000 or more.
A third of those surveyed said downsize protection was the most appealing feature of equity release, followed by portability of lifetime mortgage at 32 per cent.
Around 29 per cent said a lifetime mortgage would be appealing if it was offered by a “well-known financial services brand and a quarter pointed to fixed rated early repayment charged.
David Stevens, director of savings and retirement at LV=, said the research “highlights how the dream of a mortgage–free retirement could be over for millions of people”.
He continued: “High inflation, combined with longer mortgage terms means that more people will be forced to continue paying mortgages during retirement. This could result in less discretionary income for pensioners to spend on the more enjoyable things they had in mind for their retirement.
“Our latest quarterly survey shows that 300,000 mortgage holders have fallen behind on payments in the past three months. Many people are on fixed-term mortgages ending in the next 12 months. That means millions of people face even higher mortgage payments when they come to remortgage or switch to a variable rate.”
Stevens said that retirees were faced with difficult choices of having to draw down money from their pension at a higher rate that could be unsustainable long-term or use equity release to pay down mortgage debt.
“Our research reveals that those considering equity release are increasingly pragmatic about the option of accessing equity from their home as a way to help them achieve a more confident later lifestyle. It is very encouraging to see how the flexibility offered by today’s modern equity release products is welcomed.
“The role of advisers in supporting their clients through making these choices is incredibly valuable, especially with equity release, in helping customers decide with confidence what is right for them and addressing the worries they may have,” he added.
