Mortgage sales to over-60s have hit £13.2bn in the past year as older borrowers use mortgages to minimise inheritance tax, Bowmore Financial Planning has found.
In the year to September 30 2023, the firm found over-60s made up 6 per cent of the value of all new mortgage sales, an increase from 4.2 per cent in 2021/22.
Sales of mortgages to over-60s fell less than 1 per cent from £13.3bn last year, while overall mortgage sales fell 33 per cent from £331bn to £220bn over the same period.
Bowmore Financial Planning CEO, Mark Incledon, said the fact that mortgaging a property remains a “reliable way” to reduce inheritance tax could be the driver behind this.
“Over the last few years, mortgages have become a very popular way for older people to avoid their heirs seeing a large percentage of their inheritance disappear in tax,” he stated.
“When you work for decades to pay off your mortgage, volunteering for another one might seem strange but the reduced inheritance tax bill can be an enormous gift to your children or grandchildren.”
However, he cautioned that older borrowers do face risks when retiring with a mortgage, such as being unable to make repayments once their incomes reduce.
Bowmore also cautioned that mortgage rates have often been higher for older borrowers as lenders are less confident that they will be repaid in full and, while there is no maximum age to take out a mortgage, many lenders have their own age limits.
Lenders may ask for expected retirement income if the borrower is near retirement.
Incledon added: “While taking out mortgages in later life has become more popular in the past few years, potential borrowers might struggle finding the right lender that is willing to work with them.
“Taking out a mortgage at, or near, the end of your working life comes with risks so you have to be careful to make sure you have budgeted properly.”
tom.dunstan@ft.com
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