Energy prices are expected to rise by over 50% come April 2022, according to energy regulator Ofgem.
It is believed that energy bills will increase 14 times faster than wages over the course of 2022.
“The impact that further energy price hikes will have on over-55s in the UK is likely to be substantial, especially with rising inflation,” according to Stuart Wilson, corporate marketing director, more2life.
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Retirees are in a particularly vulnerable position as many are unable to increase their contracted hours, switch careers or work to secure a pay rise in the same way that the working population can, leaving them solely reliant on retirement income.
This also follows a difficult two years in which pension pots have suffered repeated blows.
Wilson added: “One option for retirees to address rising costs is to boost their retirement income through equity release, particularly given the average UK house price is now sitting at a record high of £278,123.
“Whether it is to manage rising energy bills or to consolidate credit card and loan debts to improve their financial security, retirees can often use the equity in their homes to their advantage.”
Colin Bell, co-founder and chief operating officer of Perenna, said that many homeowners and advisers will not have seen energy prices hit these heights before.
Due to this, he believes advisers will have a vital role to play in helping borrowers to mitigate the risk of an income squeeze.
“Those customers who fixed their energy tariff for a long period really have protected themselves from this current situation,” he added.
In these uncertain times, Bell outlined that fixing your mortgage rates for a longer period can similarly act as a suit of armour that could protect you against the shock and distress of unexpected hikes.
As more lenders join the fixed-for-life space, he believes it is worth exploring if such a product could help provide peace of mind for a concerned client.
He added: “Conversations with homeowners around energy efficiency improvements will also be especially valuable over the next few months as payback periods get shorter as energy costs rise.
“While many might not have the disposable income to invest in insulation or other home improvements, it could help limit the damage of future energy bills if you can fund this with your mortgage and protecting that payment by fixing it for life.”
Kevin Roberts, director of Legal & General Mortgage Club, said: “With the cost-of-living rising rapidly and further energy bill hikes on the near horizon, many borrowers will be keen to reduce their monthly repayments in any way they can.”
At Legal & General Mortgage Club, Roberts said there had been a reported rise in remortgage activity as borrowers hunt for the lowest rates.
In this environment, good financial advice becomes even more valuable, as it helps borrowers to avoid making wrong or sub-optimal decisions that could be very costly in the long run.
Roberts went on to explain that some brokers may well focus on their existing customer base by helping them to leverage the recent significant house price growth to access a cheaper rate through a lower loan-to-value product.
2017 was the year that five-year fixes became widespread, meaning 2022 would have always been a bumper year for product maturities regardless of the changes in the energy market.
“Recent developments have only strengthened this trend,” added Roberts.
Roberts believes that the rising cost of energy bills will also have an inevitable impact on mortgage affordability too. While lenders might not all track individual price plans, they will likely assess their risk position and draw on average price data from the Office for National Statistics.
Roberts said: “As ever, the role of mortgage brokers cannot be overstated. These are all difficult topics to broach, but the sooner these conversations with clients begin, the better.
“Acting proactively, rather than reactively, can help put advisers and their customers on the front foot.”
Despite this, the UK housing market remains attractive to investors, with many mortgage lenders still predicting a positive outlook for the year.
Roberts concluded: “Competition also remains high, and this should go some way to offset the potential impact of price rises.”