"Managing an increase of 5.65% when moving from one two-year fix rate mortgage to another or seeing an even larger 6.65% jump when you move to your lenders standard variable rate is understandably frightening."
Rising mortgage rates could force over-55s back to work as affordability worries build about affording repayments, new research from Key Later Life Finance shows.
Almost four out of five (79%) over-55s with fixed rate mortgages are concerned about being able to afford repayments once their current deal comes to an end. Of these, around 20% are extremely concerned.
For more than one in five (22%) – or around 316,000 households – the crunch will come within a year when their current deals run out. With the Office of National Statistics suggesting that most fixed rate deals ending in 2023 were set below 2%, borrowers are now facing an average two-year fixed rate of 6.85% or five-year fix of 6.37%.
The research found 70% of over-55s are on fixed rate mortgages with an average of two years left to run on the deal, which suggests that unless rates have come down drastically by 2024, borrower may still be facing hard choices.
Key’s study - conducted before the latest Bank of England rate rise to 5.25% - found 23% of over-55s say they may have to return to work or work longer hours in order to afford a higher fixed rate deal. Around 22% say they don’t think they can manage a rate of 6%-plus.
Around one in five (20%) are worried they may go into arrears on their mortgage as a result of rate rises while 21% say they haven’t dared think about their situation and 17% say they may have to downsize or sell their home to meet repayments.
Almost a quarter (23%) say they are confident they will be accepted for the best possible rate for their situation when their deal ends while 25% hope they will be.
Around 15% say they will go on to their lender’s Standard Variable Rate (SVR) and then look for a better rate when the market environment changes, while 7% say they will be happy to just stay on the SVR. Around 10% say they will take their lender’s offer and not seek advice.
Will Hale, CEO at Key, 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%. Unfortunately, that era of low mortgage rates is over. Many older homeowners are now heading for steep increases in their monthly repayments and, particularly given the continuing increases in other cost of living expenses, worries about being unable to afford higher rates are growing.
“Managing an increase of 5.65% when moving from one two-year fix rate mortgage to another or seeing an even larger 6.65% 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."
