New data reveals that UK households made a record £23.3bn in mortgage overpayments during 2022, equal to £64m per day.
This comes in response to mortgage rates rising after the mini-Budget, causing homeowners to make lump sum payments to decrease their loan sizes and limit interest rate costs.
According to the Equity Release Council’s analysis, Q4 2022 saw the highest quarterly figure on record, with £6.7bn in overpayments made.
This is a 14% increase from Q3, where overpayments totaled £5.9bn. The surge in overpayments has also prompted concerns about an increasing number of older people carrying mortgage debt and significant overpayments into retirement.
Despite the rise in overpayments, the total mortgage debt reached a new peak of £1.6tn in December 2022.
Furthermore, regular mortgage payments surpassed £15bn per quarter for the first time in Q4 last year.
Mortgage rates increased significantly in 2022, with the average 2-year fixed rate jumping from 2.38% to 6.01% and the average five-year fixed rate rising from 2.66% to 5.80%.
Jim Boyd, CEO at the Equity Release Council, said: “Growing mortgage debt means more people will be making repayments into their retirement, when most would prefer to be mortgage-free.
“This comes at a time when the cost-of-living crisis has added almost 20% to the ‘minimum’ cost of retirement, with many pensioners’ average income leaving them short of a moderate or even minimum level of comfort.
“In this environment, access to a range of later life lending products and comprehensive advice is more important than ever to help people fund their desired lifestyle in retirement.
“We are approaching the next wave of residential interest-only mortgages reaching maturity within the next five years, when many people will face a choice between borrowing for longer or selling up.
“As an industry, we need to be braced to support these homeowners to have the best retirement they possibly can, which for some will mean using flexible lifetime mortgages to remain in their homes.
“Equity release is not a silver bullet solution, but it should always be part of these important discussions.
“For the right person, at the right time, it has the potential to be a positive and life-changing decision. Using an adviser that is a member of the Equity Release Council will ensure potential customers are protected by our rigorous standards and prompted to weigh up all their options.”
