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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Latest Comments

SecomTech
SecomTech 19 Aug 2016

Firstly, I either lodge with DPS or do not take a deposit...secondly, If a tenant has not received a confirmation their deposit is secured with either a scheme or in an insured account with an agent/landlord,...

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jasonevans
jasonevans 19 Aug 2016

Belvoir has over 15 years of experience in property lettings, buying and renting and is one of the best agencies I know about. I have heard that they revived an award for the hard work. Really amazing...

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jasonevans
jasonevans 19 Aug 2016

Usually these areas are least affected when it comes to unexpected economical collapse.

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TheWaspNestRemover
TheWaspNestRemover 11 Aug 2016

You agree to pay for the treatment needed to get rid of fleas, ants, mice, wasps nests and other pests unless you can prove that these are a result of us not meeting our repairing responsibilities or these...

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madisonwelch80
madisonwelch80 02 Aug 2016

16% is quite a raise. Let's hope this tendency won't continue for long.

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madisonwelch80
madisonwelch80 02 Aug 2016

?66,963 is a serious price drop However buying a property it a serious investment only small percentage of the UK population could afford.

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madisonwelch80
madisonwelch80 02 Aug 2016

Wow, it kind of surprised me. I mean counting on mom and dad's bank even after retirement is too much. That's the moment in life when one should have ensured themselves. I am shocked.

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AbbieP.
AbbieP. 22 Jul 2016

"While house prices in the most expensive eleven boroughs have declined values in the cheapest eleven boroughs continue to rise" - not a nice way to even out the price range. London is overrated as it

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AbbieP.
AbbieP. 21 Jul 2016

And try to profit from your decisions, I may add

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CommercialTrust
CommercialTrust 19 Jul 2016

Retirement investment has always been one of the biggest draws of buy to let. And the buy-to-let demographic is, on balance, older. (Over a third of our applicants are over 50 at the time of application.) It...

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Forrest Wheatey
Forrest Wheatey 11 Jul 2016

I find the time perfect for ever home-owner wannabe. Prices should slowly, but steadily drop, at least for the inner buyer. Making it harder for outsiders to buy properties (the whole Brexit thing means...

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property guru
property guru 11 Jul 2016

Why should Ajay even have to be looking for it. It should be public knowledge. Why is not just publish each years and to were it is and be AUDITED. Accountability.

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