Millions of people over 50 in the UK are set to face a shortfall when it comes to paying off their interest-only mortgage, according to new research b…
Millions of people over 50 in the UK are set to face a shortfall when it comes to paying off their interest-only mortgage, according to new research by the Saga Equity Release Advice Service.
Underperforming endowments have left those with interest-only mortgages facing an average shortfall of £49,000, leaving one in ten with no way of paying off their mortgage.
Saga estimates that people will need to find £5 million from somewhere to keep lenders at bay.
As a result of the shortfall, people could be forced to sell their home and move into smaller accommodation. Half of people over the age of 50 haven't moved home in over 20 years and doing so is something many would rather not do as their house is filled with precious memories.
However, a quarter of people surveyed by Saga said they will have to sell their home to make up for the shortfall from their endowment policy.
Many people have devised a plan in order to combat the problem. One in 13 of those facing a shortfall have bought themselves some time by extending their mortgage with their respective lenders, while a third of all respondents will dip into their savings to pay off their mortgage.
However, while many have prepared for what is to come, there are some who have no plan whatsoever. One in ten currently do not know what they will do in order to pay the outstanding balance on their home.
Paul Green, director of communications at Saga, said: "Finding your endowment policy has failed to payout the way you expected can be a great shock, but facing an endowment shortfall need not mean that you lose your home as there are other options open to people to plug the gap."
Saga also found in another recent study that over-50s are using various other methods to save money and reduce their debt. For example, a third are now using their car much less in order to reduce fuel bills.
By Amy White