Roughly 5 per cent of pensioners are estimated to still be making monthly mortgage payments – the equivalent of almost half a million people, according to a study by SunLife.
The average pensioner’s household income is just over £30,000, meaning 30 per cent of their entire income would be spent on housing.
The SunLife report surveyed more than 2,000 people over the age of 50.
The majority of people with outstanding mortgages were still working (86 per cent), but 14 per cent of those still making mortgage payments are retired.
The full rate of the new state pension is £221.20 per week, or £11,502.40 a year, although this only applies to those who reached state pension age after April 2016.
According to SunLife, the average homeowner pensioner has a home worth more than £330,000 but a household income of just over £30,000 – meaning they are “cash poor and property rich”.
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Read More“But for many, downsizing to free up the cash is not an option – often it is too expensive, or they are emotionally tied to or physically dependent on their homes,” he said.
Another option for these retirees could be equity release, which is a tax-free way for homeowners aged 55 and over to release some of the cash tied up in their home without moving house.
Screeton said if a pensioner had a home worth £332,867 and an outstanding mortgage of £63,643, they would get just over £133,000 if they released 40 per cent of their home’s value.
“Equity release is still a loan, but one of the benefits for those pensioners living on a fairly small income that’s being eaten into by mortgage payments is that they wouldn’t have to make those monthly mortgage payments anymore,” Screeton said.
However, there are some downsides including being unable to leave your home as inheritance whilst your debt will also be increased.
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