A looming fixed rate mortgage “crunch” could force over-55s back to work, research from Key Later Life Finance has suggested.
The research, which was conducted before the latest Bank of England rate rise to 5.25 per cent, found 23 per cent of respondents said they may have to return to work or work longer hours in order to afford a higher fixed rate deal.
Additionally, around 22 per cent of respondents stated they do not think they can manage a rate of 6 per cent or higher.
These worries follow recent rises in interest rates which have increased some buyers' mortgage repayments.
Key CEO, Will Hale, said: “Most over-55s with mortgages have been protected from the impact of the Bank of England’s series of rate rises as they have been on fixed rate deals with many paying less than 2 per cent.
“Unfortunately, the era of low mortgage rates is over.”
Concerned customers
The research, which surveyed savers aged over 55 who had mortgages, also found that almost four in five (79 per cent) respondents with fixed rate mortgages are “concerned” about being able to afford repayments once their current deal comes to an end.
It detailed that, of these, around 20 per cent are “extremely concerned”.
Additionally, the research revealed that for 22 per cent of respondents, around 316,000 households, the "crunch" will come within a year when their current deals run out.
Key also stated that, with the Office of National Statistics suggesting that most fixed rate deals ending in 2023 were set below 2 per cent, some borrowers are facing a 5.65 per cent (two-year fix) jump.
It added that those savers who will be moving to standard variable rate will fair even worse.
The research also found that 70 per cent of respondents who are on fixed-rate mortgages have an average of two years left.
This therefore suggests that unless rates come down drastically before 2024, "borrowers may still be facing hard choices".
When fixed-rates end
Almost a quarter (23 per cent) of respondents said they are "confident" they will be accepted for the best possible rate for their situation when their deal ends while 25 per cent "hope" they will be.
Around 15 per cent say they will go on to their lender’s SVR and then look for a better rate when the market environment changes while 7 per cent say they will be happy to just stay on the SVR.
Around 10 per cent stated they will take their lender’s offer and not seek advice.
How to take action
Hale added: “Managing an increase of 5.65 per cent when moving from one two-year fixed rate mortgage to another or seeing an even larger 6.65 per cent jump when you move to your lenders standard variable rate is understandably frightening.
“However, there are things that can be done – provided you take the time to consider what you need ahead of time rather than waiting until you are forced to remortgage and pushed into a rushed decision.
“You may find that a retirement interest only mortgage is right for you or perhaps a modern equity release plan which offers more flexibility around repayments – allowing interest to be served, ad hoc repayments to be made or even no repayments at all if your finances are particularly stretched.”
tom.dunstan@ft.com
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