A fifth (21 per cent) of mortgage borrowers, equating to about 3m people, fear they will still be paying off their mortgage in retirement, and more than half (58 per cent) of these do not have a plan for paying off their debt.
Research by London and Country paints a “worrying picture” for those who will be borrowing into later life, as nearly a fifth (19 per cent) of those who predict they will still be paying off their mortgage beyond the age of 65 are concerned about how they will afford the payments. The broker found that almost one in ten (8 per cent) of those aged over 55 don’t think they’ll ever be mortgage-free.
London and Country says the figures are a sign that the market has changed, and people are facing the reality of having a mortgage for longer.
The broker found that a large number of people are being forced to continue working into retirement in order to pay off their mortgage. More than a quarter (27 per cent) of people who had already paid off their mortgage after 65 said they had to continue working in order to do so.
Moreover, of those who think they will still be paying their mortgage beyond 65, a third (32 per cent) predict they will have to continue working in order to afford the payments.
When asked why people think they will pay off their mortgage later than originally planned, the cost of financially supporting a family came out top, with more than a quarter (28 per cent) of people putting their family first.
London and Country associate director of communications David Hollingworth says: “The fact that people increasingly have to work beyond their standard retirement age to pay off their mortgage is a concern. 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.
“More of us are living and working for longer and in many cases taking the first step onto the ladder later in life. That, combined with high house prices and therefore a bigger mortgage adds to the likelihood of carrying mortgage debt into later life.
“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.”
The London and Country study also shed light on interest-only mortgages, where mortgage holders who are not able to repay the capital at the end of the mortgage will need to extend their borrowing or risk losing their homes.
Nearly two-fifths (37 per cent) of those on an interest-only or part interest-only mortgage said they don’t think they will be able to pay the remaining sum once their term ends – or indicated that they are unsure how they will go about it.
Hollingworth adds: “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. 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. Rather than suffering in silence, speak to someone who can help you explore the market and find a solution that works for you.”