Changing to better mortgage deals has become more challenging in recent months. The Mortgage Market Review (MMR) made it far more difficult for mortgage holders to switch to more competitive deals. There is evidence to suggest some people have been refused for mortgages that would actually bring lower monthly payments instead of higher ones. This has created a crazy situation that common sense doesn’t support.
Now it would appear some people with interest-only loans are turning to equity release to help pay off the amount still owing on their mortgages. Recent figures have shown a surprising leap in the relevant figures.
An increase of more than two-thirds in just one year
This startling statistic comes from Age Partnership, and reflects the difference that the MMR has made to this portion of the mortgage market. In the first quarter of 2014, just 45 customers chose this method to clear their outstanding interest-only mortgage. Just 12 months later, that figure had risen significantly to 510 customers.
The jump of two-thirds – or 68% to be exact – can be seen when comparing the total figures from 2014 to those in 2015. During 2014, a total of 1,605 customers took this route. However, a year later, that figure had gone up to 2,697. The last quarter of 2015 saw 775 mortgage holders take this route to take care of their mortgage.
How many interest-only mortgages are there?
Interest-only mortgages represent only a small percentage of the total mortgage market. In 2014, there were just shy of 3 million interest-only mortgages in the UK that still had amounts outstanding to be paid. This figure does not include buy-to-let properties that may have been bought this way.
Who is being hit by the effects of the Mortgage Market Review?
Everyone looking to get a mortgage will have been affected by the introduction of the review. However, these figures show how many older mortgage holders have been affected.
For these people, the chance of getting any other mortgage is slim. Their age is counting against them, and there could be limited methods they might use to resolve the problems posed by having an interest-only mortgage. As much as they might want to swap to something else, many lenders are simply unwilling to grant them a different mortgage product.
Would equity release work for everyone in this situation?
Not necessarily. For it to even be considered, the mortgage holder’s property must have increased in value since the mortgage was originally taken out. In most cases, this will certainly have occurred. However, taking out equity that could have been spent in other ways will almost certainly come as a blow to some people who are approaching retirement age.
It remains to be seen whether this pattern continues in future months. However, unless older people are allowed access to mortgage products in order to find better deals, we may soon see plenty more people opting for this solution. The MMR regulations have certainly had several knock-on effects.