One in three homeowners expects to be paying their mortgage in retirement

Posted 6 May 2016 by Nick Parkhouse

With the age of first-time buyers increasing, it is perhaps natutral that the years of borrowing on a home are extending into some people's retirement...

A new survey has revealed that a third of mortgage holders expect to be working beyond their retirement age to pay their home loan. The poll from Halifax also revealed that almost half of people were worried they would not be able to afford their mortgage in retirement.

A combination of an increase in the average age of first-time buyers and longer mortgage terms mean that more people expect to be paying off their loan into their 60s and 70s.

Half of people worried that paying their mortgage will hamper their retirement saving

A survey of over 8,000 18 to 45-year-olds commissioned by Halifax has revealed that a third of people expect to work beyond their retirement age to pay off their mortgage. The research also found that 44% were worried they will not be able to afford their mortgage payments in retirement and 51% were concerned paying their mortgage will hamper their ability to save for retirement.

Less than half of all respondents (46%) believe they will be mortgage-free before they retire, falling to just 30% of non-homeowners.

FT Adviser reports that despite these statistics, homeownership aspirations remain as strong as ever. The numbers of first-time buyers has recovered in recent years, with 300,000 taking the first steps onto the property ladder in 2015.

However, the average age of a first-time buyer is now 30.4 years – nine months older than in 2010 - and buyers are increasingly taking their mortgage over a longer term, making it much more likely that they will still be paying back the loan in their retirement.

In 2007 the proportion of first-time buyers taking up a 35-year mortgage stood at 16%, but by 2015 this figure had grown to 26%. Over the same eight year period, the share of mortgages with a 20- to 25-year term dropped from 48% to 30%.

Expert opinion

Craig McKinlay, mortgages director at Halifax, points out borrowers should be cautious when looking to extend their mortgage beyond 25 years: “This will not only increase the overall cost of the mortgage, but could have a potential knock on impact on their quality of life in retirement. A longer term will reduce monthly payments, but as homeowners build up equity they should look to reduce this term or make overpayments to ensure that the dream of owning their own home doesn’t turn into an unnecessary nightmare in later years.”

Robert Cochran, pensions development manager at Scottish Widows, cites research that suggests 45% of people in their 30s and 40s are prioritising spending now over saving for later life. Cochran says: “Yet with younger generations expecting to be paying mortgages into retirement, it is more important now than ever that people push retirement saving up their financial agenda and get a better understanding of how pounds in a pension pot translate into income in retirement to avoid facing a financial time bomb at the stage when they want to stop working.”


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