In a survey conducted by Opinium for Hargreaves Lansdowne in May, 17 per cent of the 2,000 people who were asked said that they anticipated to be over the age of 65 by the time their mortgages were paid off.
Almost one in ten people expect to over the age of 70 before they are mortgage free. Around nine per cent of the survey respondents did not believe that they would ever pay their mortgages.
Among those who are over the age of 55 and currently have a mortgage, one in five believed that they would still be making mortgage payments over the age of 70 and seven per cent said that they would never be able to pay the mortgage off.
The average age when you are expected to have paid off a mortgage is 60, a three-year jump from the same survey only a year ago.
This highlights just how cost pressures have increased as higher inflation has forced higher interest rates on mortgages.
The Bank of England’s decision last week to hike the base rate by half a point to five per cent, more than many analysts anticipated, will only increase anxiety over mortgages
However, a meeting between Chancellor Jeremy Hunt and major bank lenders agreed some measures to help mortgage payers, such as a 12-month minimum term before repossessions.
Of those who are retired who took part in the survey, 80 per cent said that they owned their houses outright, with six per cent still yet to fully settle with mortgage lenders.
Runaway mortgage rates are likely to force many to lengthen the period of their mortgages later in life.
Two year fixed rate and higher property costs a huge issue
Sarah Coles, head of personal finance for Hargreaves Lansdown said: “Higher mortgage rates are likely to mean even more people paying their mortgage later in life.
“It has pushed the average two-year fixed rate deal to around 6.2 per cent, according to Moneyfacts, causing a remortgaging nightmare for hundreds of thousands of people. As a result, lenders have agreed with the government to make it easier to temporarily extend the term of the mortgage, without affordability checks.
“It is designed to make short-term mortgage tweaks easier, but there’s every chance that people taking advantage may end up with a more permanent change, to make monthly payments affordable. It’s not just higher mortgage rates causing the problem.
“The cost of property [also] shoulders much of the blame. With the average cost of a home now at £286,000, building a deposit takes far longer, especially because we’re having to save while paying through the nose for everything from bills and rent to food. It means the average age of a first-time buyer has hit 30.
“The fact that first-time buyers are borrowing so many multiples of their income means repayments are stretched over a longer period too. The English Housing Survey in 2021/22 found that of those first-time buyers who had a mortgage, over half, 56 per cent, had a repayment period of 30 years.
“And even those who buy relatively young, with a shorter mortgage, can run into all kinds of trouble along the way, which pushes their mortgage repayment back.”
What can you do to make life easier?
Coles explained several ways borrower can combat the current mortgage climate including overpayments an equity release mortgages.
She said: “If you’re set to repay your mortgage in retirement, it’s worth considering your options. Rising prices and soaring interest rates will make overpaying your mortgage particularly difficult right now, but when wages catch up a bit, it’s worth considering. If you receive any lump sums, you could use some of it for this too.
“If you have significant savings or investments, you can weigh up whether it’s worth using them to pay off the loan. This may offer peace of mind, but it’s not always a good idea.
“During your retirement you will be spending down the savings and investments you’ve built up over a lifetime, so you may not want to wipe them out on day one. Likewise, some people will use their pension tax-free lump sum to pay the mortgage off, but this needs to be considered carefully. You may need the pot to generate an income you can live off, so dipping into it could leave you struggling throughout retirement.”
“For many people, working later in life will form part of the solution, but they’ll have a Plan B that can kick in if this isn’t possible. This could include using equity release to free up a lump sum to repay your mortgage. However, it’s important to understand the full cost.”
