Martin Lewis offers advice to 40-year-old on getting mortgage
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A study of 5,000 UK adults carried out by Equity Release Council (ERC) found that because Britons have been stepping onto the property ladder much later in life, they might still be making mortgage repayments when they’re retired. That could make life extremely difficult for future generations.
When it comes to getting on the property ladder, Britons are managing it much later than generations before them.
Lifetime mortgage company ERC has conducted new research which discovered that nearly half (45 percent) of mortgaged homeowners under the age of 40 finally stepped on to the property ladder much later than they thought they would.
That’s compared with 29 percent of over-forties who felt the same.
The result is that one in three homeowners with a mortgage is unsure if they will have managed to pay it off before they retire.
Jim Boyd, chief executive at ERC, said the study clearly showed that the under-forties were less bothered about paying their mortgage after retirement.
He said: “There are clear signs that paying a mortgage in retirement is no longer a taboo.
“One in four mortgaged homeowners said they don’t mind if they are still paying off their loan in later life, while 47 percent believe their generation’s attitude to debt in later life is more accepting than their parents’.
“Lifetime and retirement mortgages allow people to make the most of property as a source of wealth as well as a home.”
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Mr Boyd continued: “Our findings suggest later life lending products are likely to be even more important for future generations of retired homeowners than they are today.”
The number of later life lending products has shot up during the last few months with 146 products currently on the market, according to Moneyfacts.
The majority of these deals come with maximum ages of 75 – nine years after the current state pension age.
The worry is that pensioners will not be able to make significant monthly payments or that it will eat into their pension pot.
Meanwhile, many homeowners are worried how they are going to meet their monthly payments after the Bank of England (BoE) increased rates from 0.10 to 0.25 percent this week.
According to Trussle, the rise could add up to £324.48 onto the average mortgage every year, which works out at an additional £27 per month.
It will affect mortgage holders who are on their bank or building society’s Standard Variable Rate (SVR).
UK Finance has estimated that around 850,000 mortgage borrowers are on tracker rates and around 1.1 million borrowers are on their lender’s standard variable rate (SVR).
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On top of this, the Bank of England has hinted that this could be the first rate rise of several, something which is echoed by many.
Martijn van der Heijden, chief financial officer at Habito, said: “This base rate hike could be one of many going into 2022.
“Santander, Nationwide and Natwest – put through price increases yesterday, after the Bank of England announcement.
So we’re seeing a bumping-up of rates for both purchases and remortgages.”
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