Mortgage till you're 70: High house prices and rising State pension age lead to longer deals taken out later
06-21-2015
- Millions of homeowners will be saddled with a mortgage beyond retirement
- One in five home loans now stretch beyond homeowners’ 70th birthday
- Soaring house prices blamed for pushing up the age of first-time buyers
By Louise Eccles for Daily Mail
Most people look forward to hitting 65 in the knowledge that they will have retired, the kids will have left home and – most importantly – their mortgage will be paid off.
But millions of homeowners will still be saddled with a mortgage well beyond retirement, figures revealed last night.
A third of mortgages agreed last year extend beyond borrowers’ 65th birthday – compared with just under a quarter in 2006.
Millions of homeowners will still be saddled with a mortgage well beyond retirement, figures revealed last night (file picture)
One in five home loans now stretch beyond homeowners’ 70th birthday, leaving many pensioners burdened with debt. Experts said the traditional assumption that the loan would be paid off before retirement was at an end for many.
Soaring house prices have pushed up the average age of the first-time buyer, while growing numbers are taking loans of up to 35 years to make repayments more affordable.
Older borrowers coming to the end of their interest-only mortgages – which were popular in the 1980s and 1990s – are also re-mortgaging well into the retirement rather than selling their home to repay the capital part of the loan at the end of the term.
The Council of Mortgage Lenders, which published the figures, said a third of homeowners now take out a loan for longer than the traditional 25-year term, compared to one in ten a decade ago.
Many banks are cautious about lending beyond 65, especially after stricter rules came in last April.
But with workers increasingly planning to retire after 65, especially as the State pension age rises, lenders have had to adapt. If banks refuse to lend beyond 65, they will lose the custom of swathes of first-time buyers and people who could not afford a shorter loan term in the face of surging house prices.
One in five home loans now stretch beyond homeowners’ 70th birthday, leaving many pensioners burdened with debt
Mortgage broker Andrew Montlake, of Coreco Group, said: ‘To afford a mortgage, people must get on the housing ladder later or take a longer term to reduce payments – taking them over the traditional retirement age. It is becoming the norm for first-time buyers to be in their thirties, many older, so there are growing numbers borrowing well into their sixties.’
David Hollingsworth, of London & Country Mortgages, said: ‘Most people with mortgages reaching beyond retirement will try to pay it off as they near the end of it, either by downsizing or accelerating their payments.’
Broker Ray Boulger, of John Charcol, said rising numbers of graduates had also delayed home ownership because they started work later and had student loans to repay.
The State pension age will rise to 67 by 2026, while improved health means growing numbers will work to 70 and beyond. But many lenders are still reluctant to lend to pensioners. Loans to people aged 65 and over fell from £4.8billion to £1.7billion since 2007.