As more and more news articles are produced about the current economic struggles that the UK faces, we hear a lot about the impact that the economic crisis will have on young people. However, studies show that a large amount of over-50s are actually concerned about whether they will be able to weather the storm. It seems that many people between the ages of 50 and 90 are concerned about being ‘priced out’ of the market.
Are Over-50s Being Priced Out Of Their Properties By Mortgages?
As mortgage advisors, obviously the most interesting angle for us in this story is the idea that older adults are actually being side-lined in the economic crisis by mortgage lenders. It is no secret to the world that mortgage rates have increased significantly in recent months. The average mortgage interest rate in 2021 was below 3% but now stands at about 5%, sending thousands of mortgage payments skyrocketing.
Mortgage rates are dropping, but in the meantime people are looking at altering their current mortgage deals so that their payments are more manageable. Doing things like extending their mortgage term and changing the repayment method of the loan have saved people hundreds of pounds per month…but over-50s are still suffering. The majority of mortgage lenders will allow you to take a mortgage up until the age of 70 with some lenders allowing you to go to 75. So for 30 year olds with a 25 year mortgage, you could potentially add another 10 – 15 years to your mortgage temporarily to make your loan more affordable.
For example, if you are paying a £250,000 mortgage over 25 years at a rate of 2.5% for £1,122 a month initially, but your new rate comes back at 5% meaning your payments would go up to £1,461 a month. If you extended the mortgage term to 35 years temporarily, this would drop the payments down to £1,262 a month.
Mortgages For Over-50s
For people older who are struggling to cope with the rising mortgage interest rates, this option is not always available. As a 50 year old person, the maximum mortgage term you can get with most high-street lenders is 19 years. If we use the same figures as above but with a maximum 19 year term, a 50 year old’s mortgage could go up from £1,379 to £1,701 with no option to extend the term. This can ultimately lead to a dramatic drop in expendable income for people over 50. Leading to a large amount of older people fearing that they won’t be able to pay their bills, buy food, heat their homes, and generally keep a roof over their heads. A lot of older people probably planned out their income and expenditure in their later years, but an economic shock like the one we have seen recently may completely bypass these plans.
What Options Do Over-50s Have?
If you are concerned about your mortgage and your finances, the first thing you should do is speak to a financial advisor who specialises in mortgages like Oportfolio. They will be able to go through all of your finances and your mortgage with you, and help you to come up with a plan of how to make you as comfortable with your finances as you possibly can be.
This could mean switching your current mortgage deal to another mortgage lender to get a better, lower rate. Switching your mortgage product with the same lender for a better and more competitive mortgage product. Looking into restructuring your mortgage deal by exploring options such as interest only or part interest only part repayment to make your monthly payments lower. All of these options are things that can be explored by a professional advisor, dedicated to helping you get a handle of your finances. Call our team today if you are worried about your finances.