Pension changes won’t prevent mortgage crisis

Pension Changes Won't Prevent Looming Mortgage Crisis, Warns Age UK

Access to pension pots announced in the Budget will not stem the looming interest only mortgage crisis, Age UK is warning.

From 2017 40,000[i] interest only mortgages owned by borrowers aged 65 and over will mature every year.

Interest only mortgage borrowers believe their average shortfall will be just over £22,000[ii]. But the latest estimate by the Financial Conduct Authority shows that nearly half of people with these mortgages will still owe £50,000[iii].

Yet, the average pension fund from which to buy an annuity is £36,800[iv] significantly less than the debt figure. So, while being able to access your pension fund to repay a mortgage may be a useful option for some people, pension reform is not on its own the answer to the imminent mortgage debt crisis.

Age UK  believes that the new proposals to give people access to all their pension savings without having to annuitise should not be seen as a green light for financial institutions to automatically target pensions to recoup debt.

Caroline Abrahams, Age UK's Charity Director said, 'Pensions are the nest eggs we build up  for later life when our income falls. For many of us this money is all that we have to supplement the State Pension and allow us to live more comfortably. It's important that people are not put under pressure to use these savings to settle outstanding mortgage debt if they have other options, such as extending the mortgage.'

Despite the rising State Pension Age and the growing numbers of older people working, many lenders have reduced the  age borrowers can be when their mortgage matures - 75 is typical. Age UK believes affordability not age should determine whether someone is given a mortgage.

-ENDS-

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Notes to editors

[1] Residential Impact of Interest Only Mortgages - Experian for the Financial Conduct Authority May 2013
[1] Quantitative Study of Interest Only Mortgages for Financial Conduct Authority may 2013
[1]  Quantitative Study of Interest Only Mortgages for FCA May 2013
[1] ABI UK Insurance Key Facts 2013

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Age UK

We work with our national partners, Age Scotland, Age Cymru and Age NI and our local Age UK partners in England (together the Age UK Family). We also work internationally for people in later life as a member of the DEC and with our sister charity Help Age International.

Age UK believes that everyone should have the opportunity to make the most of later life, whatever their circumstances.  We provide free information, advice and support to over six million people; commercial products and services to over one million customers; and research and campaign on the issues that matter to people in later life. Our work focuses on five key areas: money matters, health and well being, home and care, work and training and leisure and lifestyle.

Age UK is a charitable company limited by guarantee and registered in England (registered charity number 1128267 and company number 6825798). Age Concern England and Help the Aged (both registered charities), and their trading and other associated companies merged on the 1st April 2009. Together they have formed the Age UK Group ("we").  Charitable services are offered through Age UK and commercial products are offered by the Charity's trading companies, which donate their net profits to Age UK (the Charity).