Air has warned that the Bank of England’s decision to pause expected base rate cuts is increasing the risk of mortgage shocks for older borrowers, many of whom face significant jumps in monthly repayments when their fixed-rate deals end.
With the base rate currently at 4%, analysts now forecast no further reductions this year amid continued inflation concerns.
The Bank of England estimates that borrowers remortgaging this year will see average annual costs rise by £1,752 – around £146 a month – as the low fixed-rate deals agreed in 2020, when the average five-year rate was 2.4%, come to an end.
Air said older borrowers are particularly exposed because they may struggle to qualify for the most competitive new deals due to changes in circumstances, such as retirement or reduced income.
Many could be forced onto standard variable rates, which can reach as high as 8%, dramatically increasing monthly costs.
Will Hale, CEO of Key Advice & Air, said: “Even moving to a new fixed rate can see monthly costs increase significantly for many customers and that applies even more if older borrowers are moving to standard variable rates.
“Many older customers will be particularly at risk as their circumstances may have changed since they last remortgaged.
“It is vital that all customers over the age of 55 do not default to a new product with their existing lender but instead talk to an adviser who can consider all their options.”
Hale added that modern lifetime mortgages can provide greater flexibility by allowing borrowers to pay all, some, or none of the interest, as well as make ad hoc capital repayments.
He said: “If they have a comprehensive conversation with an adviser they can be recommended a product that is appropriate for an individual’s specific needs, wants and circumstances.
“Advisers who do not include all later life lending products within their scope of advice should still have a wide field of vision to ensure that products such as modern lifetime mortgages are still considered even when affordability on mainstream products can be met.”
Hale said affordability for customers over 55 should not be seen as a binary issue, and that lifetime mortgages, which come with features such as certainty of tenure and no negative equity guarantees, can support better outcomes.
“Lifetime mortgages have moved well beyond a product of last resort and having a trusted referral relationship in place with a later life lending specialist can allow all advisers to deliver a holistic proposition and good outcomes for their older customers,” he said.
