How many UK retirees are still paying off mortgages?

Find out how many over-50s are also splashing a chunk of their income on housing

How many UK retirees are still paying off mortgages?

More than half a million retirees in the UK still have outstanding mortgages, according to research from over-50s life insurance and equity release specialist SunLife.

It surveyed 2,000 people over the age of 50 and found that of the two-thirds (68%) who are homeowners, almost one in four (23%) are still paying off their mortgage.

The research revealed that while most (87%) of those with outstanding mortgages are still working, 13% are already retired. This indicates that one in 14 retirees in the UK — equivalent to just over 500,000 people — are still burdened with monthly mortgage payments.

On average, these retired mortgage holders owe £33,627. Over a remaining five-year term at the current Bank of England base rate of 5.25% on a repayment mortgage, this would result in a monthly payment of £638.

“According to our research, the average homeowner retiree has a home worth more than £320,000 but a household income of less than £30,000,” said Mark Screeton (pictured), chief executive at SunLife. “This means that the vast majority are cash poor and property rich. And while most own their homes outright, around one in 14 still have a mortgage.

“So, for those people, a chunk of that relatively modest income is still being spent on housing, rather than on making the most of life in retirement. For some of these people it could make sense to tap into the equity that’s tied up in their homes.

“But for many, downsizing to free up the cash is not an option – maybe it’s too expensive, or they have emotional or physical ties to their homes and neighbourhoods. That’s where equity release, where suitable, could offer a solution.”

Screeton pointed out that equity release is a tax-free way for qualifying homeowners aged 55 and over to unlock some of the cash tied up in their homes without moving house, with homeowners typically able to release between 20% and 60% of the property’s value. He, however, offered a reminder that homeowners with a remaining mortgage must pay it off with the equity they release before using the remaining funds as they wish.

“So, let’s say a retiree has a home worth £327,020 and an outstanding mortgage of £33,627. If they were able to release 30% of their home’s value, that would be just over £98,000. Once they use this money to pay off their remaining mortgage, they’re left with more than £64,000 to do whatever they want with,” Screeton explained.

“Equity release is still a loan which accrues compound interest, but it doesn’t need to be repaid until you pass away or move into care permanently. This can free up retirement funds for those living on a pension income that’s being eaten into by mortgage payments.

“Even if you chose to make repayments to cover the interest on the equity release loan, these could still be considerably less than the repayments on a standard mortgage.”

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