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Loan for life
In fact, one in 10 of those over 55 don’t think they’ll ever be mortgage free.
“The fact that people increasingly have to work beyond their standard retirement age to pay off their mortgage is a concern,” said David Hollingworth from L&C.
“Many will see a dip in income post-retirement which could pose affordability issues for older borrowers. Although homeowners will, and should, continue to aspire to pay off their mortgage before retirement, the reality for many could mean having a mortgage for longer.
“It’s clear that homeowners will shift their priorities depending on family needs. For example, so many first time buyers are reliant on the Bank of Mum and Dad. However there still needs to be a clear focus on the repayment of the mortgage, to avoid reaching a point that could force the sale of the family home.”
He added: “It’s not all doom and gloom however and people should assess their options and use the time before retirement to make a plan. The good news is older borrowers have more choice than ever, as the industry continues to innovate and cater for an ageing population.
“Lenders have become increasingly flexible in their approach to older borrowers and the retirement interest-only mortgage market is one that is only likely to see more growth.”
Almost 40 per cent of all those currently on an interest-only or part interest-only mortgage don’t believe they will be able to pay the remaining sum once their term ends.
When former interest-only mortgage holders have managed to pay off their loan, almost half relied on endowment policies and a third used savings or investments to do it.
These days though, stretched household incomes mean UK consumers are saving less than at any time in the last 50 years. With real wages still more than 5 per cent below the 2008 peak, millions of people have less than £100 in savings.
And yet the average outstanding mortgage among the over-65s alone – those who might expect to have the lowest levels of outstanding borrowing after a working lifetime of repayments – is £86,000. It’s up 13 per cent in the last three years, according to data from the Centre for Economics and Business Research.
But there may still be options out there. “Repayment of an interest-only mortgage that once seemed a million miles away may now be looming large for those that haven’t set capital aside,” adds Hollingworth.
“That may force the need to refinance and extend the mortgage term. Mortgage options for those that can demonstrate ongoing affordability are growing in number so it makes sense to seek advice sooner rather than later.”
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