This would force people to cut their pension savings to cover increased repayments on debt.
If interest rates were to rise, 40% of over-50s still in work said they would have to reduce their pension contributions just to make sure the higher cost of paying debts such as mortgage repayments, credit cards and loans could be met. More than four in ten (44%) of all working over-50s, and 34% of those aged 60-69 in work, have outstanding mortgage debt on their home, despite many nearing retirement age.
An interest rate hike would be a double blow for the over-50s. In the UK, 1.2 million working over-50s are planning on using their home to help fund their retirement, but over half (54%) believe the value of their home has fallen over the last three years, with £21,706 wiped off their property on average (60 billion in total). So an interest rate rise depleting their savings, as well as increasing their mortgage on a property already worth less than they hoped, would have a big impact on their retirement plans.
Vanessa Owen, LV= head of equity release said: “It’s worrying that a rise in interest rates would force many people nearing retirement to reduce their savings. With the extra strain a rise in interest could bring, our research shows that many people believe their property is the best chance they have to fund a comfortable retirement, despite the recent fall in property values.
“Someone’s home is often their greatest asset, and if they are struggling to build up an adequate pension pot it’s a sensible option to take professional advice on how using the value of your property can help fund your retirement.