Worrying number of home owners plan to use pension to pay off mortgage

Taylor Scott International News

More than half a million 40 to 70 year olds in England intend to use part or all of their pension to repay their mortgage, according to new research. While 58% take a more traditional approach to managing their mortgage by making monthly repayments until it is paid off and 22% making lump sum payments in addition to monthly contributions some have other ideas. One in 10 intend to use their tax free pension lump sum to repay the outstanding balance on their mortgage and 5% plan to use their pension to repay the outstanding balance on their mortgage. In addition, 7% claim to have savings or investments set aside to meet this cost which suggests that they may hold one of the estimated 2.2 million interest only mortgages outstanding on lenders books. The firm says that it is worrying that 6% plan to use an inheritance to repay their mortgage and 3% to take in a lodger to help them meet this cost, neither of which are guaranteed sources of finance. ‘It is worrying to see that over half a million people in England plan to use all or part of their pension to repay their mortgage. This suggests that the number of people who actually need to do this is likely to be far higher as unexpected events such as redundancy, illness or family financial emergencies cause issues,’ said Mark Stopard, head of product development at Partnership. ‘While it is natural for people to want to retire debt-free, the purpose of these savings is ideally to provide an income for their retirement which can last up to 30 years or more. Although the state pension will provide a very basic safety net, it is unlikely to be sufficient for people to have as comfortable a retirement as they might wish,’ he explained. ‘This research clearly highlights that people need to focus on repaying their mortgage as early as possible and avoid traps such as remortgaging for the full period each time they take out a new deal,’ he pointed out. ‘Even those who are currently retiring have options such as working longer, downsizing or taking out an equity release plan, all options that will help to keep their pension funds intact,’ he added. Taylor Scott International

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