UK households made “an unprecedented” £23.3bn of mortgage overpayments last year, or £64m per day, as mortgage rates spiked in the wake of the mini-Budget, says the Equity Release Council.
The September fiscal statement “prompted those able to do so to make lump sum payments and reduce their loan sizes to limit interest rate costs,” says the body in its Spring 2023 Market Report.
In the final quarter of last year, £6.7bn of overpayments were made, the highest quarterly figure on record, and 14% higher than the third quarter.
Throughout 2022, the average two-year fixed-rate home loan leapt from 2.38% to 6.01% between January and December, while the average five-year fix rose from 2.66% to 5.80%.
But despite this jump in overpayments, total mortgage debt also hit a new high of £1.6trn in December, the council says, “prompting fears that many older people might carry mortgage debt and burdensome overpayments into retirement”.
It adds the nation’s regular mortgage payments passed £15bn per quarter for the first time in the final three months of last year, up from £14.3bn in the third quarter.
The total value of private property in the UK topped £7.3trn last year, ending the year 7% higher than in December 2021.
In the same period, net property wealth hit £5.6trn, or £228,300 per household, an 8% rise.
The group says: “These year-on-year increases were affected by falling house prices in the year’s final quarter but reflect broader trends driving higher property values across the year.”
Equity Release Council chief executive Jim Boyd adds: “Growing mortgage debt means more people will be making repayments into their retirement, when most would prefer to be mortgage-free.
“This comes at a time when the cost-of-living crisis has added almost 20% to the ‘minimum’ cost of retirement, with many pensioners’ average income leaving them short of a moderate or even minimum level of comfort.
He points out: “Equity release is not a silver bullet solution, but it should always be part of these important discussions.
“For the right person, at the right time, it has the potential to be a positive and life-changing decision.”
