1 in 6 Adults Expects to Be Paying off a Mortgage in Retirement

One in six people expects to still be making mortgage payments past the age of 65, six years beyond the average age for paying off the loans, a new report from Hargreaves Lansdown has revealed.

The financial firm surveyed 2,000 UK adults in April, finding that for many, a paid-off home is a distant dream. A fifth of those over 55 with a mortgage expect they’ll still be paying it off past the age of 70. A further 5% of older mortgage-holders admit they will never be able to pay off the loan.

The total percentage of homeowners who are unsure when they will be able to pay off their mortgages has increased, from 11% in 2019 to 16% today.

Hargreaves Lansdown attributed the increased timeline on many mortgages to higher property prices, which have delayed homeowners for many Britons. Buyers are also more likely to take out longer-term mortgages to make their monthly payments on these more expensive properties affordable.

The increasing prevalence of higher education has delayed the start of workers' careers and saddled them with high amounts of debt at the start of adulthood, further delaying homeownership.

Divorce is another reason buyers are taking out mortgages later in life. Meanwhile, buyers who took out interest-only mortgages and find they don’t have the savings to pay the outstanding debt may then take out a repayment mortgage.

Personal financial analyst Sarah Coles said: “Given the enormous cost of property, and the uncertainty in life, it’s not a huge surprise it’s taking longer to repay the debt.

“Even if you snap up a property at the average age of 30, and take out a 25-year mortgage, it only takes the odd life hiccup to push payments into your 60s. If you end up dipping into your property equity, or face divorce, you can push your final repayment date back beyond retirement.”

However, she said that facing mortgage payments as a pensioner isn’t the end of the world—provided you’ve saved for retirement. “However, if your pension can’t cover [your mortgage payments] and you’re relying on being able to work later in life, you open yourself to all sorts of risks.”

Additionally, you may struggle to remortgage later in life. Once you’re over 50, the number of lenders willing to lend to you dwindles. Some lenders will only issue mortgages to those over 60 under special circumstances and won’t lend at all to those over 70.

The illness or death of one partner on a joint mortgage could also make the payments unaffordable.

Concerned about making mortgage payments into retirement? You could increase your monthly repayments now to clear the debt faster. You could also work longer to ensure you still have income coming in, use savings and investments or a pension tax-free lump sum to pay off the mortgage, or downsize. You could also switch to a retirement interest-only mortgage or release equity.

One positive that Hargreaves Lansdown found is that the mortgage holidays taken during the coronavirus crisis haven’t significantly delayed when many people expect to pay off their loans. This is because when payments resumed, most lenders increased borrowers’ monthly bills rather than increasing the mortgage term.

"The fact that 2.9 million people took mortgage holidays during the crisis hasn’t significantly moved the dial" on repayment timelines, Coles said.