Thousands face retiring with unpaid mortgage

 

More than quarter of a million interest-only borrowers could reach retirement age by the end of the decade while still owing substantial sums on their mortgage, an Independent on Sunday investigation has found.

An analysis of Financial Services Authority (FSA) figures shows that of the 150,000 interest-only mortgages a year that are due to mature in the next eight years, 60,000 are likely to be in shortfall. Of these 42,000 will be in the names of people over the age of 60 either at or close to retirement.

"There is a horrendous situation developing with tens, if not hundreds of thousands, of people getting to retirement age and being asked to stump up for a mortgage which may not have been sufficiently covered by an endowment investment or even capital growth," says Stephen Lowe, the director of Just Retirement.

"The options will be stark: work on to repay the debt or find another way to use their home's equity, even resorting to selling up," Mr Lowe adds.

But many people in this position will find it hard to extend the term of their mortgage because of a recent move by banks to tighten the criteria on interest-only mortgages. In many instances providers are now restricting these products to 50 per cent loan to value.

"This is a particular concern for those in the North who have not seen any house price recovery since 2007," says Una Farrell, of the UK's biggest debt charity the Consumer Credit Counselling Service said.

"The concern is that many people on these deals will be in negative equity or close to it, perhaps because during the good times they took out extra borrowing on their mortgage. They get to 60 or above and they literally have no way of repaying the capital sum on their mortgage. We are seeing increasing numbers of people in this dreadful situation."

Of particular concern is that many face a triple whammy – their endowment or other investment vehicle is not performing well enough to pay off the mortgage; house price falls leave them in or near negative equity; and that as they reach 60, the chances of staying in full-time work diminish.

Figures from the Office for National Statistics show that, on average, UK workers retire between the ages of 62 and 63, a couple of years before they are entitled to a state pension.

"There is a cohort of people who could be facing a major debt hangover with no means of paying it back. The mortgage industry has to wake up to this issue. The really worrying thing is they don't know how much all this debt is worth," Mr Lowe warns.

Martin Wheatley, the managing director of conduct and business at the FSA, last week told the Treasury Select Committee that it had suggested to lenders that they ought to help these people roll-over into a new mortgage rather than hit them with a demand for repayment at the end of the mortgage term.

As yet, lenders are showing little sign of a co-ordinated response. Jayne Walters, of the Council of Mortgage Lenders, says the industry understood there was a problem. "Each lender is approaching it in their own way," she says. "They are contacting people with interest-only to see how they intend to pay it off and discuss the options. However, this can only be done on a case by case basis."

For homeowners, taking steps now is paramount, says Ben Thompson, the managing director of Legal and General Mortgage Club. "Speak to an independent intermediary as well as your lender and assess your options. If you can afford to do so, see if your mortgage conditions allow you to overpay each month. If you can, this will improve your position. And start to create more equity in your home," he says.

Suggested Topics
News
US comedian Bill Mahr
people
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Sport
football
News
Rob Lowe
peopleRob Lowe hits out at Obama's snub of Benjamin Netanyahu
PROMOTED VIDEO
News
Davies (let) says: 'Everybody thought we were having an affair. It was never true!'
people'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
Arts and Entertainment
Over their 20 years, the band has built a community of dedicated followers the world over
music
News
Staff assemble outside the old City Road offices in London
mediaThe stories, the writers and the changes over the last quarter of a century at Britain's youngest paper
Life and Style
The Oliver twins, Philip and Andrew, at work creating the 'Dizzy' arcade-adventure games in 1988
techDocumentary looks back at origins of the computer-games industry
Arts and Entertainment
Krall says: 'My hero player-singer is Elton John I used to listen to him as a child, every single record
music
News
Friends for life … some professionals think loneliness is more worrying than obesity
scienceSocial contact is good for our sense of wellbeing - but it's a myth that loneliness kills, say researchers
Arts and Entertainment
The Wu-Tang Clan will sell only one copy of their album Once Upon A Time In Shaolin
musicWu-Tang Clan and The Sexual Objects offer fans a chance to own only copies of their latest albums
News
i100
Environment
Number so freshwater mussels in Cumbria have plummeted from up to three million in the 20th century to 500,000
environment
Life and Style
Models – and musicians – on the catwalk in Dior Homme for the men’s 2015/16 fashion show in Paris
fashionAt this season's Paris shows, various labels played with the city boys' favourite
News
i100
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Tax Assistant

    Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

    Recruitment Genius: Outbound Sales Executive - OTE £25,000

    £16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

    Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

    £45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

    Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

    £35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

    Day In a Page

    Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

    What the six wise men told Tony Blair

    Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
    25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

    25 years of The Independent on Sunday

    The stories, the writers and the changes over the last quarter of a century
    Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

    Homeless Veterans appeal

    As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
    Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

    Smash hit go under the hammer

    It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
    Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

    The geeks who rocked the world

    A new documentary looks back at origins of the computer-games industry
    Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

    Belle & Sebastian is taking a new direction

    Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
    America: Land of the free, home of the political dynasty

    America: Land of the free, home of the political dynasty

    These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
    A graphic history of US civil rights – in comic book form

    A graphic history of US civil rights – in comic book form

    A veteran of the Fifties campaigns is inspiring a new generation of activists
    Winston Churchill: the enigma of a British hero

    Winston Churchill: the enigma of a British hero

    A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
    Growing mussels: Precious freshwater shellfish are thriving in a unique green project

    Growing mussels

    Precious freshwater shellfish are thriving in a unique green project
    Diana Krall: The jazz singer on being friends with Elton John, outer space and skiing in Dubai

    Diana Krall interview

    The jazz singer on being friends with Elton John, outer space and skiing in Dubai
    Pinstriped for action: A glimpse of what the very rich man will be wearing this winter

    Pinstriped for action

    A glimpse of what the very rich man will be wearing this winter
    Russell T Davies & Ben Cook: 'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'

    Russell T Davies & Ben Cook: How we met

    'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
    Bill Granger recipes: Our chef serves up his favourite Japanese dishes

    Bill Granger's Japanese recipes

    Stock up on mirin, soy and miso and you have the makings of everyday Japanese cuisine
    Michael Calvin: How we need more Eric Cantonas to knock some sense into us

    Michael Calvin's Last Word

    How we need more Eric Cantonas to knock some sense into us