Mortgage debt held by over-65s to double by 2030
It said borrowing in later life will move from niche to mainstream in the next decade as people delay buying their first home because of house price inflation, tighter credit conditions and low real wage growth.
The report by the International Longevity Centre-UK (ILC-UK) and the Building Societies Association (BSA) said the mortgage market is witnessing a marked evolution from the ‘traditional route’ of people buying their first homes in their 20s, trading up in their 30s and 40s, paying off debt in their 50s and 60s and then entering older age with little or no mortgage debt.
Since the financial crisis, homeownership among 20-29 year olds has fallen from 53% to 38% and from 73% to 65% for those aged 30-39.
The time in life when mortgages are paid off has shifted with the research showing six per cent or 1.42 million people aged 35 to 64 will not have paid off their mortgage before retirement given the current term of their loan.
If nothing changes, it will become more common for consumers to buy for the first time in their late 30s or 40s, with longer mortgage terms from the outset.
Paul Broadhead, head of mortgage policy at The BSA, said: “In my view the socio-economic changes lenders and consumers are already experiencing are unstoppable. So the focus must be on adapting to a changing market. Top priority must be given to radically increasing housing supply across all tenures, including recognising shared ownership as a tenure in its own right.
“We must also respond as an industry to reflect the changing needs of customers. This will include an increasingly intergenerational approach to homeownership, as parents and grandparents borrow to release some of their housing wealth to support the younger generation. It is the combination of multiple factors that will drive greater levels of mortgage borrowing in later life.”
Ben Franklin from the ILC-UK, said: “The housing market must better adapt to our ageing society, building more homes for all ages across a range of tenures. Over the course of a lifetime, including in retirement, consumers will need to have access to the right mortgage products and advice in order to maximise their long run financial well-being. Building societies have made a good start in this regard, but, this is a whole of market challenge that will ultimately need whole of market solutions.”
See YourMoney.com’s guide to getting a mortgage in later life.