Nearly half a million pensioners in the UK have not repaid their mortgage and are using almost a third of their income to pay it off, research shows.
According to research from SunLife, which surveyed around 2,000 people over 50, of the 69% that are homeowners, around a fifth still have a mortgage, with the average amount owed coming to £67,478.
The majority – around 86% – are still working, but approximately 14% who are paying off mortgages are retired, and are therefore using their pension income.
SunLife estimated that around 5% of all pensioners in the UK are making monthly mortgage payments, equal to 494,541 people.
The firm said retired mortgage holders owe around £63,643, which comes to an estimated monthly mortgage cost of £767.75.
SunLife said that, assuming a pensioner’s household income of just over £31,000 per year, around a third of their income is going on housing.
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The report stated that around a fifth of those surveyed didn’t want to leave their home but fear they will struggle financially if they do not downsize or move to a cheaper property.
SunLife said equity release, such as a lifetime mortgage, could help retirees in this situation, as it could release cash locked in their property. Nothing needs to be repaid until the borrower passes away or moves into long-term care, so multiple monthly payments do not have to be made.
Mark Screeton, CEO of SunLife, said the average home-owning pensioner has a home worth more than £330,000, but a household income of just over £30,000.
“This means that the vast majority are cash-poor and property-rich, and while most own their homes outright, around one in 20 still have a mortgage. For those people, a huge chunk – almost a third – of that relatively modest income is still being spent on housing.
“It could make sense for some of these people to tap into that equity that is tied up in their homes. But for many, downsizing to free up the cash is not an option – often it is too expensive, or they are emotionally tied to or physically dependent on their homes,” he explained.
Screeton said that, for example, if a pensioner with a home worth £332,867 and an outstanding mortgage of £63,643 released 40% of their home’s value, that would be just over £133,000, and after the mortgage has been cleared, this still leaves them almost £70,000 to spend as they see fit.
Screeton added: “Equity release is still a loan, but one of the benefits for those pensioners living on a fairly small income that’s being eaten into by mortgage payments is that they wouldn’t have to make those monthly mortgage payments anymore.
“Even if they chose to make repayments to cover the interest on the equity release loan, it could still be less than the repayments on a standard mortgage.”
