Mortgage prisoners turn to equity release
The retirement income specialists said that since the Mortgage Market Review came into force last April with its tougher affordability requirements the number of desperate interest-only borrowers turning to equity release has trebled.
There are an estimated 300,000 interest-only borrowers who will become mortgage prisoners when their deals expire by 2020.
Since the introduction of the MMR so far 2,246 older borrowers have used equity release to pay off interest-only mortgages.
Simon Chalk, equity release expert at Age Partnership, said: “The interest-only time-bomb has been made all the more devastating by the affordability criteria introduced by lenders as a consequence of the Mortgage Market Review.
“Fewer older homeowners have the opportunity to remortgage to set up a new strategy to clear their debt. That leaves swathes of homeowners with no obvious way to clear their interest only debt whilst still remaining in their home.
“In the worst cases, retirees are being forced to sell-up and move to a smaller home to pay down their debt – a stressful and emotionally turbulent outcome which often causes unnecessary upset in later life. This is an urgent situation: those borrowers with interest-only deals should not be forced to abandon their life-long homes.”
Older borrowers have also found it difficult to remortgage due to their age, leaving equity release as their own option other than selling their property.
After taking out equity release typical interest-only borrowers were typically left with £26,060.