Is MMR forcing people to turn to equity release?

Is MMR forcing people to turn to equity release?

The number of customers in the UK using equity release to repay an interest-only debt has risen by over two thirds (68%) from 1,605 in 2014 to 2,697 in 2015.

A new report fom Age Partnership has suggested that the tougher criteria introduced by MMR in April 2014 means that growing numbers of interest-only borrowers are struggling to extend the length of their mortgage to clear their debt due to being deemed too old.

Q1 2014 – pre-MMR – saw just 45 customers use equity release to pay down their interest-only mortgage. By comparison, the same quarter the following year (Q1 2015) saw 510 customers.

By Q4 2015, this number hit 775 – the highest quarterly total to date.

In total, 4,815 customers have used equity release as a means of paying back their interest-only mortgages between the introduction of MMR on 26th April 2015 and 31st December 2015.

In 2015, the average customer had £66,035 in outstanding debt from their interest-only mortgage. This was almost a fifth (19%) more than the average customer in 2014 who owed £55,397. Customers in 2015 also released 10% more equity with an average of £76,810, up from £69,617 in 2014.

Recent data from the CML shows that in 2014 there were almost 3 million interest-only mortgages outstanding to homeowners in the UK (excluding buy-to-let).


Previous research from the FCA also suggested that around half of these people will struggle or have no means to pay back their interest-only mortgage, making them “interest-only prisoners”.

Simon Chalk, equity release expert at Age Partnership, commented: “We have clear evidence emerging that the MMR has meant hundreds of thousands of older borrowers are struggling to find a repayment option. They simply don’t fit the bill for lenders anymore, as mortgage lenders have imposed much stricter lending criteria on their customers. This is especially the case among the older generation of borrowers who face reluctance from lenders to extend the term, or remortgage their debt once they reach a certain age, regardless of their financial position. For these interest-only prisoners, options such as a Lifetime Mortgage could provide an age-sensitive solution and allow them to dip into their housing equity to pay off the remaining debt.

We have not only seen a burst of over-55s turning to equity release, such as lifetime mortgages, as the impending maturity of their interest-only mortgage looms, but we are also seeing more customers with higher levels of non-mortgage debt. These factors – individually or combined – present a significant concern and reflect the need for a review of the market with a focus on the older borrower who is unable to go down the more traditional route of remortgaging.

For those unwilling or even unable to go through the process of downsizing, extracting cash from their existing housing equity can not only alleviate the mortgage debt built up, but also leave some additional cash to enjoy in retirement.”

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Tony Gimple
Tony Gimple 09 Dec 2017

Linking professionalism to limited company borrowing is a flawed concept. Despite S24 etc., limited companies are the most tax inefficient way of running a property business and leave borrowers seriously...

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Evelyn Attwood
Evelyn Attwood 01 Dec 2017

It's normal. If you plan to buy a house in one of the most beautiful spots in the country you should pay a high price.

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Evelyn Attwood
Evelyn Attwood 01 Dec 2017

I think that the situation will be the same at December.

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Scott Garnet
Scott Garnet 06 Nov 2017

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richardrawlings
richardrawlings 01 Nov 2017

What has not been mentioned here is the effect of not only higher interest payments, but also that these payments are less likely to be offsettable as a business cost due to the scaling back of mortgage...

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Kelvin Lloyd
Kelvin Lloyd 09 Oct 2017

IT is up, to the Planners. If they will only give permission for bungalows on certain (suitable) sites, they will be built.

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maggie swift
maggie swift 09 Oct 2017

It's just the beginning of the shocking rise.

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maggie swift
maggie swift 09 Oct 2017

I have recently read that the bungalows can provide social housing for elderly residents in London.

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zoe glover
zoe glover 05 Oct 2017

Update! Worst company I have ever dealt with. Undervalued a Cambridge property by over 100k, wont take on any evidence of valuation including a RICS valuation done 3 years ago for the very same value...

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Paul Edwards
Paul Edwards 27 Sep 2017

Its nonsense articles such as this that make it harder to get clients to realise just how difficult the market is out there. When you see Rightmove and there are more 'price reduced' then 'new' most days...

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Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

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RyanGeo
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

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