Warning for elderly borrowers as payback time approaches on interest-only home loans that were handed out in the 1990’s
- Many who took out loan in the 1990’s are being reminded their mortgage term is coming to an end
- Large numbers of these people will have no plans in place to repay their loan
Thousands of elderly borrowers could be heading for financial disaster by burying their heads in the sand over their mortgages.
Many who took out loans in the 1990s on an interest-only basis are receiving reminders in the post that their mortgage term is coming to an end.
Lenders are sending the letters because they fear those who have only been paying mortgage interest could be in trouble if they do not have a plan in place for repaying the original loan.
Many who took out loans in the 1990s on an interest-only basis are receiving reminders in the post that their mortgage term is coming to an end
While some borrowers have savings set aside and others are preparing to release cash by selling up and moving to a cheaper home – large numbers will have no plans in place to repay their loan.
New research by mortgage broker London & Country suggests many will end up lugging their home loans well into retirement – with a significant number resigned to keeping them until death do them part.
The survey estimates that as many as four million people – one in three borrowers – will have to rethink their finances as they get older because their mortgage will still be with them.
David Hollingworth, of London & Country, says: ‘The average borrower aged 55 and over thinks they will pay off their mortgage by age 68. But one in 10 believe they will never be free of their mortgage millstone.’
Options for elderly borrowers are improving. New-style loans now allow borrowers to continue to make interest-only payments with the loan repaid when they die or go into residential care.
They must be able to prove that they can afford the monthly interest payments.
The rates on these ‘retirement interest only’ deals range from about 2.59 per cent for a discounted variable rate to 2.65 per cent for a five-year fixed rate. Lenders include building societies Penrith, Hanley Economic, Leeds and Tipton & Coseley.
Other borrowers are remortgaging, taking advantage of the fact that some lenders are now prepared to continue lending to borrowers living into theirs 80s and 90s.
Lenders operating in this market include building societies Family, Ipswich, Leek United and Nationwide.