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Mortgaged over-55s say cost of living will make it hard to pay off before they retire

Nearly one in three over 55-year-olds with a mortgage say their repayment plans have been affected by the cost-of-living crisis.

In total there are 3.3 million over-55’s in the UK who have an outstanding balance on their mortgage. Of those, 16 per cent say the rising cost of living will make it harder to fulfil their aim of paying off the loan before retirement, according to equity release adviser Key. 

And 13 per cent of the group say the current economic conditions mean it will take them longer to own their property outright.

Rising costs: More over-55s are struggling to pay off their mortgages before they retire

The situation has deteriorated rapidly over the past 12 months. In the second quarter of 2022, 44 per cent of over 55s with mortgages said the current environment had no impact on their repayment plans. Now, the figure has dropped significantly to 28 per cent.

Rising interest rates on mortgages have limited people’s ability to secure better terms when remortgaging and added to the overall cost of any outstanding balance.

>> Will mortgage rates go down in 2023?  

On 1 August 2022, the average two-year fixed mortgage rate across all deposit sizes was 2.52 per cent, according to data from Moneyfacts.

The figure peaked at 6.65 per cent on 20 October with the five-year fixed rate at 6.51 per cent on the same day.

There has been some recent let-up, as average fixed rates for both two- and five-year mortgages have steadily fallen despite a string of base rate rises from the Bank of England in a bid to tackle the high level of inflation. 

However, average fixed rate mortgages are still much higher than they were six months ago at 5.75 per cent and 5.57 per cent over two and five years, respectively. 

 You can check how much a mortgage deal would cost you each month with our true cost mortgage calculator. 

The increase in mortgage rates is impacting those hoping to repay their loan before retirement

The increase in mortgage rates is impacting those hoping to repay their loan before retirement

Two in five (40 per cent) of over-55s have already repaid their mortgage. Last week data from the 2021 census revealed that 32.8 per cent of households (8.1 million) owned the accommodation they lived in outright, an increase from 30.8 per cent (7.2 million) in 2011.

Will Hale, CEO at Key, equity release adviser, said: ‘It is extremely worrying that almost 900,000 over-55s are going to find it tougher to repay their borrowing as they work hard to deal with rising household bills alongside the need to save enough to be able to enjoy a secure and fulfilling retirement.

‘While homeowners should always get specialist advice before they choose to access the equity in their homes, this option should be considered carefully – especially given the flexible nature of products like equity release.’

>> What to do if you are struggling to afford your mortgage payments

‘I sold my family home as the costs were too much – now I’ll be mortgage-free 11 years earlier’

Products like equity release aren’t for everyone, and many will instead choose to downsize. 

Last year Fiona Moore, a 55 year old social worker from Blackburn, decided to downsize from her family home after the combination of mortgage payments and necessary repairs became unsustainable.

‘It was the family home where I brought up my children, so I tried everything to keep hold of it,’ she told This is Money. 

‘I took a mortgage break, but eventually ended up getting into debt with other things so I could keep the mortgage. I was putting the weekly shop on a credit card as keeping the house was more important.’

However, she decided last year that the situation couldn’t go on as she was in negative equity and the situation was impacting her health. The property also needed £44,000 of repairs, for which she would have needed to take out a loan. 

Fiona, 55, decided to downsize her property after the mortgage payments become unaffordable

Fiona, 55, decided to downsize her property after the mortgage payments become unaffordable

If she extended the mortgage on her original property she says it would have taken her until she was 71 to pay off the mortgage, but in her new home she will have repaid the £32,000 loan in 5 years; by the time she is 60.

‘I hoping to travel and do more interesting things’, she says.

However, she also has suffered as a result of the sharp increase in mortgage rates last year. Fiona had originally hoped to sell her property in March allowing her to secure a rate of 2.9 per cent on her new home, but the buyer fell through meaning she was forced to wait longer and had to take on a much higher rate of 4.9 per cent.

While she did consider taking out equity release against the property, the experience of selling her father’s home after he had done the same made her reluctant to take that route. 

>> Downsizing or equity release: Which option is the best for you?

Data from equity release advisor Age Partnership reveals that 37 per cent of homeowners used equity release to clear their mortgage in 2022.

Equity release allows homeowners, aged 55 and over, to release a percentage of their property value as tax-free cash, whilst still retaining ownership of their house.

The product has grown in popularity over recent years, with £1.7 billion being released from properties between July and September in 2022, according to figures from the Equity Release Council.

Get a free guide to equity release

The Mail on Sunday has produced an essential guide for people aged 55 or over who are looking to extract equity from their homes to boost their finances. 

The 40-page booklet, by Mail on Sunday Personal Finance Editor Jeff Prestridge, examines all the financial options available to equity-rich, cash-poor homeowners – and their respective merits and potential drawbacks. 

It also gives invaluable guidance on the equity release products available and how they can be best set up to mitigate interest costs and protect a slice of a home’s value for inheritance purposes. 

To request your free copy of The Mail on Sunday’s guide to unlocking the cash from your home, call 0808 239 5293 or visit 


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