One in six will still be paying their mortgage after age of 65
One in six people believe that they will definitely be over 65 by the time they repay their mortgage, and another 9% have no idea when it’s going to be paid off, new research has found.
However, younger people are more optimistic with 80% of 16 to 34 year olds expecting to pay it off by 65. But there are signs this optimism is misplaced as the Financial Conduct Authority has found 40% of first time buyers in 2017 will still be repaying at 65.
Among those aged 55 with a mortgage, 26% expect to pay it over the age of 70 and 12% don’t think they’ll ever repay. The average age people expect to repay their mortgage is 57 and a half years and 44% of people are worried they’ll run out of money in retirement.
‘While previous generations might be mortgage free by their 50s, increasingly we’re saddled with debts as we head into retirement. Higher property prices and more people in higher education mean we’re buying later and borrowing more for longer,’ said Sarah Coles, personal finance analyst, Hargreaves Lansdown.
‘We face more backwards steps along the way too, dipping into equity to support our offspring, dealing with the horror of an interest only shortfall, or starting all over again after divorce. It’s hardly surprising that one in six people say they’ll definitely be over 65 when they repay their mortgage,’ she pointed out.
She explained that for some people this is all part of a sensible long term plan as they won’t reach state pension age until their late 60s, so they already plan to work past 65, and will still be able to afford their mortgage payments.
‘Even if they choose to retire earlier, they may find it perfectly manageable if they have generous pensions and can access low interest rates on their small remaining mortgages,’ she said.
‘But others are victims of circumstances, who won’t be able to repay by the time they retire, can’t work later in life, and can’t afford to pay their mortgage from their pension. These people could end up as one of the one in five who say they’ll never be able to repay,’ she added.
The firm says there are other options such as repaying more now, work out if a pension will cover payments, continue working until the mortgage is paid it off, pay it off from savings and investments, use a pension tax free lump sum to pay it off, downsize, release equity, or switch to a retirement interest only mortgage. But it adds that these may not be suitable steps for everyone and it is important to take advice.