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.”

Join our mailing list:

Leave a comment



Latest Comments

Christian Donovan
Christian Donovan 18 Aug 2017

The write-down on house values, combined with the fall in the GBP saddled the fund?s property portfolio with a 1.4% loss in the second quarter. The shocking amount of $240 million.

view article
Samantha Goodman
Samantha Goodman 11 Aug 2017

Interesting point of view.

view article
Samantha Goodman
Samantha Goodman 11 Aug 2017

It depends on the people, some older adults decide to make a long-distance move in order to live closer to their children or settle in a place with a lower cost of living.

view article
brandonlee10
brandonlee10 24 Jul 2017

The financial ramifications of the triggering of Article 50, the starting gun for Britain's departure from the EU, are far from clear. Buyers will be most cautious in London, given that buying a home in...

view article
IrisJ.
IrisJ. 19 Jul 2017

Great advice, but may I also add that when buying an already built home, make sure you do all of the proper inspections. Most importantly pest inspection because people tend to get surprised when they

view article
IrisJ.
IrisJ. 17 Jul 2017

The third point is, in my opinion, the most important one. People have become too inconsiderate and careless when it comes to rented properties. If a landlord wants to protect their property, regular visits...

view article
cornishalan
cornishalan 10 Jul 2017

Added to the cost of purchasing these village properties are the above average maintenance costs. Particularly where the property is a listed building or requires specialist building skills such as thatching...

view article
Jo Mullett
Jo Mullett 07 Jul 2017

Here in Swansea, known as the Japanese knotweed capital of the UK, it never fails to amazes me that people have no idea of the potential problems this invasive non-native plant can cause when buying or...

view article
NathanG
NathanG 05 Jul 2017

McDonalds, for example, have been purchasing their real estate on prime locations for years. If something happens to the company they'll have invaluable assets that will be able to save them. We might

view article
Jonah
Jonah 04 Jul 2017

Graham: surprised to see you cite the "extra tax liability" as capping out at ?560. It doesn't - the extra tax is exponential, as it is levied on the income (i.e the inflating level of rental income you...

view article
Dianne Griffen
Dianne Griffen 29 Jun 2017

Be very wary of anyone bringing you deals that they have ?found? and want to ?sell on to you? or ?joint venture? with you on ? you need a proper legal contract for this, involve a RICs surveyor to confirm...

view article
jason hadzikostas
jason hadzikostas 28 Jun 2017

The most important thing is a budget. Students have to manage their spendings in food, house maintenance, books and many other things. According to me, student Studios are the perfect option for them as...

view article

Related stories

More articles from Finance