A survey of 5,000 people conducted by the Equity Release Council (ERC) and Canada Life found that the 22 per cent who said current mortgage payments stopped them from saving towards retirement was higher than the 14 per cent who said the same in 2021.
Some 19 per cent of respondents did not know if they would be mortgage-free by the time they retired.
Nearly one in six – 16 per cent – said their mortgage debt was stopping them from retiring altogether, which was higher than the 14 per cent who said the same in 2021. A tenth said they could not reduce their hours at work because of their mortgage payments, a greater share than the four per cent impacted in 2021.
As for their current lifestyle, 21 per cent said mortgage payments were stopping them from affording a comfortable lifestyle, up from 13 per cent in 2021.
Respondents suggested this was affecting their wellbeing, as 13 per cent said mortgage worries kept them up at night, 11 per cent were prevented from moving home and seven per cent had to stop other family plans.
Accessing property wealth
The majority – 90 per cent – of respondents said it was important to be mortgage-free in retirement.
The study found that it was less important to younger homeowners to be mortgage-free by the time they retired.
Despite its importance, just two-thirds of all respondents believe their mortgage will be cleared by this point, and this figure fell to 60 per cent among those aged 55 and over.
To support their lifestyles, respondents suggested they would rely on property wealth and later life mortgages.
Some 31 per cent said accessing property wealth later in life would improve their finances and retirement income, up from the 25 per cent who believed the same in 2021.
Just over a quarter – 26 per cent – said a later life mortgage would boost their income, which was higher than the 21 per cent who had the same view in 2021.
Juggling retirement savings and mortgage bills
Jim Boyd, CEO of the ERC, said higher interest rates pushing mortgage payments up was “making it difficult for homeowners to prioritise retirement savings alongside their mortgage and wider bills”.
He added: “While this might be something they can just about manage in the short term, the real concern of this spike in mortgage costs is the strain it puts on people’s long-term financial resilience. It’s truly alarming that mortgage debt has become so uncomfortable that people are having to put off starting a family, ending a relationship, or changing career. Having to push back key milestones and life moments like this is not only disheartening, but could ultimately be detrimental to society as a whole.
“Rather than struggle against the tide, we need to recognise we are in a new era where the goal of becoming mortgage-free will, for some people, be less important than the practical need to access property wealth in later life. With approximately £2.63trn of net housing wealth in homes owned by people aged 65 or over, there are clear signs that a shift in the national conscience is underway and property wealth is stepping into the spotlight for retirement planning conversations.”
Tom Evans, managing director of retirement at Canada Life, added: “Retirement feels like a distant dream for many, and having worked hard throughout life, it’s logical to hope or even expect to be mortgage-free when reaching this milestone. As the past few years have shown us, though, unexpected changes can happen, with plans getting turned on their head. As such, many of us will face the possibility of having to adjust our ways of living in retirement.
“Whilst this may feel unsettling, it’s important to remember that there are always options. Lifetime mortgages now offer greater flexibility to individual needs, and so more people may consider the prospect of using property wealth alongside other assets to fund retirement. Our customer data show that paying off an existing mortgage has been the top reason for releasing equity for the past six years, but this is just one of many drivers for customers releasing value from their homes.”
