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Equity release as a solution if you can’t pay your mortgage with rising interest rates

Stories of homeowners waking up to find that they can no longer afford their mortgage due to rising rates are becoming commonplace. Average mortgage rates have risen to 6.66% – the highest rates seen since the 2008 financial crisis, hitting mortgage holders as lenders pass on costs. However, if you are struggling to pay your mortgage there are options available. Here’s how equity release was a solution for one of our clients over 55 who could not afford to remortgage, providing the support they needed to remain in the home they cherish.

The situation

This was the case for one of our clients over 55 when her fixed-rate mortgage came to an end, and she was faced with a new and incredibly more expensive mortgage on her home.

A 65-year-old social care worker, our client faced rates of 7.9%, which saw her monthly mortgage payments increase from £850 to £1,400 – which was unaffordable for her circumstances. This meant that she was having to work seven days a week to make ends meet and the stress and burden were becoming difficult to manage. The combination of high mortgage costs and a necessity to work harder and longer hours made her plans to retire at 67 appear impossible.

The client spoke with her mortgage broker to explore the options available. Trusting our independent expertise in later life lending and having referred clients to 55Plus previously, the mortgage broker was confident we were the right choice for her circumstances and made an introduction.

How 55Plus helped

One of our expert advisers immediately arranged to have a video call with the client to discuss possible solutions. This was to discuss the situation, what she wanted to achieve and to explore whether she had any other alternative financial options available first, such as borrowing from a family member. As with all our clients, if we do not think equity release is suitable, we always say so.

Once our adviser was satisfied that a later life lending scheme was a good solution to our client’s remortgaging challenge, we arranged further meetings and conducted a fact find, to discuss her financial status, plans moving forward and to complete the required applications.

The outcome

Due to decreasing property values in the current market, our client’s house was valued lower than she had expected. This meant that the Loan-To-Value (LTV) against the property was higher. Our specialist equity release adviser, being highly experienced in supporting homeowners over 55 with unique property circumstances, was able to find a lender with a Lifetime Mortgage offer that was better suited to the client’s financial means.

This meant our client was now able to remortgage her property at a much more comfortable monthly cost, with the added security of knowing it was fixed for life and safe from fluctuating rates. She was also given the flexibility to choose how to manage her mortgage repayments, which included not making regular contributions (which would grow the final debt on sale of the house), interest-only payments to maintain the debt, part payments or even overpaying (within limits) to reduce any final costs owed.

The entire process took five weeks from application to completion of the new mortgage offer, giving our client the peace of mind that she was no longer at risk of losing her home – and could now return to planning her retirement in the way she had originally planned.

Get in touch today for an initial, no-obligation consultation and find out whether equity release is right for you – in person or by phone or video.