3 Million Mortgage Holders Fear They Will Still Be Paying Off Their Mortgage After Retirement

Research from L&C Mortgages, the UK’s leading online mortgage broker, has found that a fifth (21%) of current mortgage holders believe they will still be paying off their mortgage beyond the age of 65 – equating to 3 million people.

Even more concerning is that almost six in ten (58%) of those who don’t expect to be mortgage free by the time they reach state retirement age, do not have a plan for how they will pay it off. They may face a stark choice – take out a new deal or risk losing their homes.

Over half (58%) of those who don’t expect to be mortgage free by the time they reach retirement age do not have a plan for paying off their debt
Over a quarter (26%) of this group said that having a mortgage after the age of 65 makes them feel anxious
A third (32%) of mortgage holders who think they will eventually be mortgage free believe they will be older than expected by the time they clear the debt
A quarter (28%) of people expect to be paying off their mortgage later than planned due to family commitments/expenses

Mortgage misery in retirement

Perhaps unsurprisingly, given the distinct lack of planning, one in four (26%) said that having a mortgage after 65 makes them feel anxious. Worryingly, of those who don’t expect to be mortgage free by retirement and are without a plan to pay it off, half (53%) are currently over the age of 55 and must now face up to reality. This emphasis on dealing with your mortgage earlier in life is echoed by reports² that a growing number of pensioners are living in poverty, a harsh reminder that failing to plan could cause financial problems further down the line.

The research paints a worrying picture for those who will be borrowing into later life, as nearly a fifth (19%) of those who think they will still be paying off their mortgage beyond 65 are concerned about how they will afford payments as they enter retirement age. In fact, one in ten (8%) of those over 55 don’t think they’ll ever be mortgage free, a sign that the market has changed, and people are facing the reality of having a mortgage for longer.

Working on a way to pay

L&C found a large number of people are being forced to continue working into retirement in order to pay off their mortgage. Over a quarter (27%) 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 off their mortgage beyond 65, a third (32%) believe 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 over a quarter (28%) of people putting their family first.

David Hollingworth from L&C said:

“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.”

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. Anyone feeling anxious about their options shouldn’t panic and should seek expert advice.”

Interest-only ignorance

The study also shed light on interest only/part-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. Worryingly, almost two fifths (37%) of those on an interest only/part interest-only mortgage said that 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. Of those who own their property outright having held an interest only/part interest-only mortgage previously, nearly half (46%) revealed that they relied upon endowment policies to pay off the remaining capital at the end of their period, with over a third (35%) using savings and/or investments.

David Hollingworth concludes:

“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.”

Kindly shared by L & C Mortgages