Millions of home owners in the UK believe that they could still be paying off their mortgage when they are beyond retirement age, new research has found.
Overall 21% of people with a mortgage see themselves still paying off the loan after retirement, which amounts to around three million people, according to the research from online mortgage broker L&C mortgages.
It also found that more than half of them, some 58%, do not have a plan for paying off their mortgage by the time they reach state retirement age and the broker warns that they could be faced with the stark choice of finding a new deal or risk losing their homes.
On top of this 32% or people with mortgages believe that they will be older than expected by the time they pay off their loans and 28% think that this will be later than planned due to family commitments and expenses.
The research also found that 26% feel that having a mortgage after the age of 65 makes them feel anxious.
Of those who don’t expect to be mortgage free by retirement and are without a plan to pay it off, 53% are currently over the age of 55 and 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.
Indeed, some 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.
This more face working beyond retirement to pay their mortgage with the study finding that 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, some 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 28% of people putting their family first.
‘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,’ said David Hollingworth from L&C.
‘Although home owners 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,’ he pointed out.
‘It’s clear that home owners 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 explained.
He also pointed out that older borrowers now 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,’ Hollingworth added.
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.
It found that 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, 46% revealed that they relied upon endowment policies to pay off the remaining capital at the end of their period, with 35% using savings and/or investments.
‘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,’ Hollingworth said.
‘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,’ he added.
