More young people will have mortgages in retirement

Edward Savage
Personal Finance Editor
May 23, 2024 1:49 PM

More young people will have mortgages in retirement

The latest data from the Bank of England show there’s been a surge of homeowners taking out mortgages that they’ll still be paying off in retirement (over the State Pension age of 66).

A large majority of these are those under 30 years old.

The data shows an increase to 42%, from 31%, of all new mortgages having an end date past 66 years old. Comparing the last 3 months of 2021 vs 2023, and a total of nearly 300,000 new mortgages with the longer end date across the 3 years.

It comes as mortgage rates have increased dramatically over the last few years, with an average 5 year fixed rate mortgage rising from 2.64% to 5.65% (Moneyfacts, December 2021 to 2023).

35-40 year mortgage terms (how long the total mortgage is for) provide a way to lower monthly mortgage payments, often to something much more manageable, and therefore provide a preferred option for people to get onto the property ladder – but will mean more interest paid over the lifetime of the mortgage.

Mortgage term

Could this be a rising trend for the future? Could there be implications for pensions and retirement income? It’s too soon to tell.

The mortgage term can be reduced in future if you make overpayments, or remortgage to a new deal – however reducing the term can mean higher monthly repayments.

This could mean new mortgage holders may need to remortgage as much as 20 times during their lifetime, rather than 12 times with a standard 25 year mortgage (presuming all are 2 year fixed rate mortgages).

Nuts About Money tip: a mortgage broker, such as Tembo¹, can help you find the right mortgage for you, and run through all your options, whether you’re a first time buyer, or looking for a new deal.

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