Brits rely on inheritance to pay off mortgage

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by Kay Murchie

A recent survey of 2,000 people by Engage Mutual Assurance has established that 11% of Britons say they cannot afford to get on the property ladder without a windfall from their relatives, while 23% said they would not be able to fund their mortgage without inheriting money.

The findings reflect data from the Council of Mortgage Lenders (CML) who said in the last 5 years, there has been a rise in interest-only mortgages from 9% to 26%.

On an interest-only mortgage, borrowers only pay back the interest on the initial loan meaning they will have to make separate provisions for paying back the original amount borrowed.

Therefore, these types of mortgages should be accompanied by another savings plan that builds up over time into a lump sum meant to pay off the borrowed amount in full, rather than relying on a windfall to pay off the mortgage.

Commenting on the data, Nick Breton from Engage Mutual Assurance, said it may be that people have interest-only mortgages and they’re not saving, or their endowment isn’t going to pay up. It reflects the fact that some people haven’t been funding their mortgages properly.

Relying on inheritance is not a good way to plan finances as you can’t be sure of the amount you will receive, warns a spokesperson for the Consumer Credit Counselling Service (CCCS).

The spokesperson for the CCCS adds that people are living for longer and pensions aren’t what they were so parents might need to use the inheritance money to live on.