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Research reveals mortgage burden on retirees in the UK
Four in 10 over 50s in the UK are paying off a mortgage worth on average of £49,000 and a fifth in their 70s are still paying off their mortgage, new research has found. Overall more than 900,000 people in their 70s still have an average mortgage bill of some £38,000 and that means the over 70s are saddled with an extraordinary total mortgage debt of £35.2 billion, according to the study by Saga Personal Finance. And for 6.3 million over 50s with an interest only mortgage who had intended to pay it off with an endowment policy, the outlook is not good with two thirds saying their underperforming endowment will not foot the bill. Indeed, some are having to contemplate selling their house to make up an average shortfall of more than £42,000 and a third of over 50s, would need to sell their house to make up the shortfall, according to Saga’s research. Two thirds of over 50s have made alternative plans to pay off their mortgage, often using a combination of options. A third say they will dip into their savings, 22% say they have been making capital repayments to reduce the debt, 18% will use other investments to make up the shortfall and just over one in 10 say they have extended their mortgage to give them extra time to pay it off. However, more than one in 10, some 1.7 million people, admit they have no way of bridging the gap. Another solution for people who have no idea how they are going to clear the mortgage or who are facing the decision to have to sell a home they do not want to part with could be to use equity release to clear the debt. ‘Being saddled with mortgage debt well into your retirement is far from ideal as it means keeping an eye on the coffers when you should making the most of life,’ said Jeff Bromage, chief operating officer, Saga Personal Finance. ‘Millions of British home owners have been hit hard by underperforming endowments. Thankfully, there are options available. A growing number of people are turning to equity release as in order to avoid selling their home. Selling and moving is probably the least-favoured option for many facing a shortfall, as their home is so much more than bricks and mortar and will hold so many happy memories,’ he explained. ‘If you’re over 55 and a home owner, equity release could be a solution. It gives you access to money tied up in your home, giving you peace of mind and the freedom to enjoy your retirement properly,’ he added. Continue reading
Latest index provides further evidence of UK house price growth slowing
UK house prices increased by 0.5% in October but annual residential property price growth slowed to 9%, according to the latest index from the Nationwide building society. It is the second month in a row when annual property price growth has fallen and Nationwide chief economist Robert Gardner said that a variety of indicators suggest that the market has lost momentum. ‘The number of mortgages approved for house purchase in September was almost 20% below the level prevailing at the start of the year. Some forward looking indicators, such as new buyer enquiries, suggest that activity may soften further in the near term, especially in London,’ he pointed out. ‘However, broader economic indicators remain positive. The labour market has continued to improve, with the unemployment rate falling to 6% in the three months to August and mortgage rates have fallen back towards all-time lows. Indicators of consumer confidence have also remained close to recent highs,’ he explained. ‘If the economy and the labour market remain in good shape, activity is likely to pick up in the quarters ahead providing mortgage rates do not rise sharply,’ he added. The Nationwide report also points out that an increasing number of borrowers have been opting for fixed rate mortgage deals in recent times. Data from the Council of Mortgage Lenders suggests that around 90% of new mortgages were contracted on fixed rates in recent months, up from 67% two years ago. ‘Fixed rate deals are most popular amongst first time buyers for whom certainty over monthly payments is likely to be particularly important. Some 95% of new mortgage lending to first time buyers is currently on fixed rates,’ said Gardner. ‘Borrowers taking out fixed rate mortgages have benefited from historically low interest rates. For example, the average two year fix for those with a 25% deposit is currently 2.46%. While this is a little higher than earlier this year, it is still more than one percentage point below the level prevailing in 2012. Moreover, for borrowers with a 10% deposit, the rates available for two year fixes are the lowest on record,’ he explained. ‘This has helped, in part, to offset the negative impact of rising house prices on affordability. Indeed, even though house prices are at an all-time high, the cost of servicing a typical mortgage is still close to the long term average as a share of take home pay,’ he added. However, despite the high proportion of new mortgage lending on fixed rates, the majority of the stock of outstanding mortgages, around 60%, is on variable interest rates. Gardner said this is a marked shift from the pre-crisis period where the proportion of mortgages on variable rates was 38%. Moreover, the majority of recent fixes are for relatively short time periods with 62% for two years and around 30% for five years. Gardner believes that the housing market should be able to cope with higher interest rates, provided the increase is gradual and the economy and the labour… Continue reading
Advertised rents growth varies considerably in the UK
The South East of England, East Anglia and Scotland have seen advertised residential rents reach record highs in the third quarter of 2014, according to the latest published index. Overall across the UK, advertised rents increased by £66 per month in a yearly comparison to reach £1,034 per month, the data from Move With Us shows. In the South East and East Anglia they reached the highest recorded levels in at £1,254 and £947 per month, increasing by £18 and £11 each month respectively and Scotland also continued to be a strong performing region, with average rents hitting record levels of £727 per month. The firm said that, as with the second quarter of the year, the average national rent has been significantly influenced by a burgeoning London market. The average advertised rent in London increased by £118 in the quarter to reach £2,452 per month, some £230 higher than it was during the same period in 2013. In northern regions of England, however, rents have fallen gradually across the board with Yorkshire and Humber seeing price reductions of over £20 per month. ‘There is a stark contrast between the South and North of England as the divide between the cost of renting increases,’ said Robin King, director of Move With Us. For example, in Yorkshire and Humber the average rent is only £4 per month higher in a yearly comparison but in the South East this figure is significantly higher at £112 per month. North of the border, in Scotland, landlords have benefited from a significant rise in the average advertised rental price. ‘Annual growth is always good news for landlords but those in regions where we are not seeing huge amounts of growth shouldn’t be too concerned as we approach the end of the year. January is likely to bring a new influx of potential renters to the market who are looking to move in the New Year,’ he added. A regional breakdown shows that the average rental price in London is more expensive than in the summer high of 2012 when the London Olympics artificially inflated asking rents. Rents are continuing on an upward trajectory which is likely to continue into 2015. The quarter ended with the average advertised rent at £2,452 per month. Average rents in the South West have grown steadily throughout 2014, however, rents have fluctuated week to week while never falling below an average of £800 per month. In the third quarter the market improved marginally in July before dipping £3 or 0.4% in August and September. The average advertised rent is the region is £33 or 4.28% up in a yearly comparison at £813 per month. While the average rent seems set to continue to grow over the next year, it’s likely that minor fluctuations will persist, according to the index report. The South East is the strongest performing region outside of London and the average advertised rents have grown steadily over the past two years. In the last year, rents have… Continue reading
