Almost half (46%) of people over the age of 55 who are paying off mortgages are worried about rising rates, continuing to meet repayments and how to pay their loans off in full, research by PensionBee has found.

The online pension provider found that three quarters (76%) of respondents over the age of 55 who have a mortgage were concerned about rising interest rates, and 62% also worried about how they will manage their payments at the end of term.

Respondents with a household income of less than £30,000 were more worried about these rises than average (83%) and also about managing repayments (72%).

The research also found that almost one in five (19%) of mortgage holder respondents over the age of 55 are not working, with 22% saying they work part-time and 59% full-time.

Of those aged 65 and over who have a mortgage, 65% said they are still working either full-time or part-time despite being in receipt of the state pension, suggesting that the need to continue to repay a home loan keeps people in work for longer.

Furthermore, nearly half (47%) of those surveyed over 55 years old stated that their current mortgage interest rate is between 2% and 4%, with 12% on a lower rate of 1-2%, and 25% on a rate of between 4-5%. However, small proportions said they were paying higher, with one in 10 saying they were paying between 5-6%, and 5% said they were paying a mortgage rate of over 6%.

Director of public affairs at PensionBee, Becky O’Connor, said: “The current mortgage rate rise shock may be contributing to an abrupt rethink of retirement plans and causing worry and uncertainty among the population of older homeowners still repaying loans.

“Anyone hoping to wind down from work as they approach their pensionable years and who still has a mortgage to pay could face a significant reality check in the coming months. Their mortgage could suck away even more of their disposable income, potentially forcing them to work for longer.

“Those on interest-only deals will not only face potential rate rises, but the additional headache of a looming deadline for repayment of their capital balances. Money they might have earmarked for repaying the capital at the end of the term might now need to go towards monthly repayments.

“It’s worrying that almost half of respondents in this older age group are not sure how they will repay their mortgage in full. One in five are pinning their hopes on a capital lump sum, while one in six think they will use their pension.”

O’Connor also highlighted that people can access their pension from age 55 and can take 25% as a tax-free lump sum, and with mortgage rates rising so rapidly, suggested it may be “tempting” for some to tap their pension to pay off a home loan.

“Having a mortgage that runs into retirement can be a problem, because repayments can mean people have to take more out of their pensions in the early years,” she added.

“Anyone who is considering this must bear in mind the potential impact of using up tax-free cash early on in retirement and then running the risk of not having enough money later on to maintain enough income for a decent living standard.

“Pensions are designed to provide this income. While it can make sense to use some of the pot to pay off mortgages, it’s good to be aware of what this can do to living standards in retirement.”

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