Paying off interest-only mortgages

More older borrowers are now using equity release to pay off interest-only mortgages.

Last year 2,697 borrowers used an equity release mortgage to pay off interest-only debt, a 68pc increase from 2014, according to retirement specialist Age Partnership.

Many borrowers are struggling to extend mortgages or remortgage because lenders perceive them as being too old.

Most people released £76,810, to pay off debt from an interest-only mortgage averaging £66,035.

Customers using equity release were also on average a year older, at 70, than they were in 2014.

The average customer is also wealthier, with £313,297 in housing wealth compared to £267,456 in 2014.

In 2014 there were almost three million interest-only mortgages which had not been paid off by homeowners in the UK.

London and the South East were the most popular areas for equity release. Londoners also have on average almost double the interest-only mortgage debt than homeowners in the rest of the country. However, higher house prices mean that London homeowners were on average able to release more than double the UK average amount from their homes.

Risk-averse lenders are increasingly refusing to approve mortgages for homeowners who will have to continue paying off the loan into retirement, forcing more to turn to equity release to pay off interest-only debts.

Last year the Financial Conduct Authority predicted that equity release would become the norm, as so many older people have their wealth tied up in property.

Most equity release products these days have a "no negative equity" guarantee, meaning that the size of the loan cannot exceed the value of the house, irrespective of the length of time that the mortgage is held.