The looming fixed rate mortgage “crunch” could force over-55s back into work as affordability worries build, new research from Key Later Life Finance has suggested.

According to the new findings from equity release adviser, approximately four out of five (79%) over-55s with fixed rate mortgages are concerned about being able to afford repayments once their current deal comes to an end.

Key’s nationwide study, based on 1,000 adults over the age of 55 who own a home with a mortgage, revealed that for more than one in five (22%) – a figure that could equate to around 316,000 households – the crunch will come within a year of when their current deals run out.

With data from the Office of National Statistics suggesting that most fixed rate deals ending in 2023 were set below 2%, some borrowers are facing a 5.65% jump for a two-year fix, with those moving onto standard variable rates (SVRs) set to fair even worse.

Key’s research indicated that 70% of over-55s are on fixed rate mortgages with an average two years left to run on the deal, which suggests that unless rates have come down drastically by 2024, borrowers may still be facing hard choices.

The study, which was conducted in July before the most recent Bank of England base rate rise to 5.25%, also found that 23% of over-55s said they may have to return to work or work longer hours to afford a higher fixed rate deal. Around 22% said they don’t think they can manage a rate of above 6%.

CEO at Key, Will Hale, said: “Most over-55s with mortgages have been protected from the impact of the Bank of England’s series of rate rises as they have been on fixed rate deals with many paying less than 2%. Unfortunately, that era of low mortgage rates is over.

“Many older homeowners are now heading for steep increases in their monthly repayments and, particularly given the continuing increases in other cost of living expenses, worries about being unable to afford higher rates are growing.”

Key’s findings indicated that one in five (20%) over-55s are even worried they may go into arrears on their mortgage as a result of rate rises, while 21% said they haven’t dared think about their situation, and 17% may have to downsize or sell their home to meet repayments.

“Managing an increase of 5.65% when moving from one two-year fix rate mortgage to another or seeing an even larger 6.65% jump when you move to your lenders SVR is understandably frightening,” Hale added.

“However, there are things that can be done – provided you take the time to consider what you need ahead of time rather than waiting until you are forced to remortgage and pushed into a rushed decision.

“No one option is right for everyone but by speaking to an adviser who specialises in later life lending products, you can gain an understanding of your different choices.”

Share Story: