Experts provide fresh hope to older homeowners with mortgage debt | Personal Finance | Finance

Rising interest rates are hitting the growing number of older homeowners with mortgage debt in retirement and many risk losing their homes if they cannot afford to service the loan.

With the Bank of England expected to hike rates for the 14th time in a row to 5.25 percent tomorrow, the pressure will intensify.

Older borrowers nearing the end of a fixed-rate deal face standard variable rates of up to 8.45 percent unless they remortgage to a best-buy deal.

Finding a lender is harder as you get older but struggling homeowners do have options. It is now easier to get a traditional mortgage in later life as long as you have the income to service it, said Chris Sykes, technical director at brokers Private Finance.

Halifax is increasing its maximum lending age to 75, in line with NatWest, HSBC, Nationwide and Santander, he said. “The move seems to be driven by the growing trend of people working later in life.”

You have to show you can afford to service the debt from income, and while extending your mortgage may make payments more manageable, this should only be a temporary measure, Sykes added. “Consider other options such as overpayments or remortgaging once rates fall.”

Another option is an equity release lifetime mortgage, which lets homeowners borrow a lump sum or draw regular income from the equity in their home, without having to make any capital or interest repayments. Instead, the interest rolls up and the debt is cleared when the property is sold after the owner and any partner dies or goes into care.

Lifetime mortgage customers still own their property and can live there for life. The debt hits inheritances but products guarantee families can never owe more than the home is worth.

Equity release interest rates are fixed for life but have risen in the last 18 months and this has hit demand, so check a lesser-known option – the retirement interest-only mortgage (RIO).

Borrowers can apply after 55, there is no upper age limit, and you keep the mortgage for life.  Customers have to make monthly interest payments until they either die or go into long-term care. Then the property is sold to pay off outstanding capital, with the surplus falling into the family estate.