Nearly a third of current mortgage borrowers underestimate the time it would take to pay off their mortgage, a study has found.
Research from broker L&C Mortgages reveals that 32 per cent of mortgage holders (four million borrowers) will be older than they expected when they are mortgage free and may have to reassess their financial situation.
The study finds that as people get older, they become more realistic about when they will pay off their mortgage. The average 18 to 34-year old believes they will be mortgage free by 51, 35 to 54-year olds think it will be paid off by 58, while those 55 and over on average think they will be borrowing into retirement age, paying it off by 68.
In addition, 8 per cent of those over 55 believe they will never be mortgage free.
Nearly a third (32 per cent) of women said financially supporting a family is the main reason they expect to pay off their mortgage later than planned, while just a quarter (24 per cent) of men gave the same response.
Of those who say that they may still be paying off their mortgage after 65, nearly two thirds (65 per cent) of women asked said they don’t have a plan, compared to half of male respondents.
L&C associate director of communications David Hollingworth says: “What is becoming increasingly clear is the market has changed, people are facing up to the fact that they are going to have their mortgage for longer.
“It’s great to see such an optimistic younger generation who think they will be debt free by the age of 51, however the reality for many older borrowers is that they will be paying off their mortgage into retirement and beyond, which is clearly a shock. The optimism displayed by the younger generation is admirable but perhaps misplaced, and not realistic as our research shows that raising a family, among other commitments, can get in the way further down the line.”
Hollingworth adds that borrowers need to acknowledge how long they will have the debt and plan accordingly.
“As the industry continues to innovate and cater for an ageing population, older borrowers have more options at their disposal and anyone feeling worried shouldn’t panic and should seek expert advice.”
Of the survey respondents, 31 per cent currently hold an SVR, while 46 per cent of those who own their house outright said their last mortgage was an SVR. L&C points out that this suggests borrowers could pay off their mortgage even earlier if they took time to find a better deal.
Hollingworth says: “While there may be specific circumstances where sitting on an SVR makes sense, for the most part this group of people could be getting a head start for later life by shopping around and saving themselves a small fortune.”