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One in five will still pay their mortgage after the age of 65

Paloma Kubiak
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Paloma Kubiak

One in five people expect to continue paying their mortgage after the age of 65, but with health and wealth typically declining in later years, homeowners may struggle.

Brits are repaying their mortgage later in life, with one in five homeowners aged 55 and over saying they expected to keep up payments in their 70s. This is up from one in six last year.

But for 5%, they said they’d never be able to repay their mortgage, according to research by Hargreaves Lansdown.

The average age that homeowners expect to repay their mortgage is also creeping up, from 58 last year to 60 now.

Hargreaves Lansdown said there are a number of reasons why it’s taking homeowners longer to pay down their mortgage debt.

Higher property prices mean it takes longer to save a big enough deposit, and longer to earn enough to qualify for a mortgage.

Buyers are also taking on longer mortgages to spread repayments; 35-year mortgages are growing in demand.

With more people in higher education, people are starting work later, and already carrying debts, which pushes a property purchase even further down the line.

Divorce is also a contributing factor. A quarter of those marrying since the 1990s were divorced by their 10th wedding anniversary. The average age to get divorced is 45, and starting again at this stage often means taking on a new mortgage.

Thousands of interest-only mortgages have come to an end in the past couple of years, with 40,000 expected to mature this year. Where there’s nothing in place to repay the outstanding debt, a new repayment mortgage could be one option.

Unsecured borrowing has also been on the up with many then consolidating their debts by remortgaging.

The risks associated with later life mortgage payments

One of the biggest concern centres around health as people may be forced to give up work sooner than planned.

More than half of people aged between 50 and retirement age have at least one long-term health condition, while a quarter are disabled.

Brits considering using their pension to pay their mortgages may also find affordability issues, and the remortgaging options shrink for borrowers aged 50 and over.

Some may also find that they’ll suddenly need to fund their mortgage on their own, rather than share the cost with a spouse.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Even if you snap up a property at the average age of 34, and take out a 25-year mortgage, it only takes a little bit of life to get in the way to leave you repaying well into retirement. If you end up dipping into your property equity, or face divorce in your 40s, you can push your final repayment date into your 60s.

“This doesn’t have to be the end of the world. If you’ve saved for a generous pension, and your mortgage will be fairly modest by then, it may well be affordable. However, if your pension can’t cover it and you’re relying on being able to work later in life, you open yourself up to all sorts of risks.

“If you expect to repay your mortgage in retirement, it’s worth thinking how you can cut your risks. This might mean having a plan B, or taking steps today to protect yourself.”

Coles lists the following points to help:

Repay more now: If you can remortgage to a lower interest rate, more of your monthly payments go towards repaying the loan.

Keep working until you’ve paid it off: If you’re well enough, have no caring responsibilities, and work is available, working longer until your mortgage is repaid is going to be a sensible option for many people.

Pay it off from savings and investments: 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.

Use your pension tax free lump sum to pay it off: 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.

Downsize in retirement: This can solve the problem, but do the maths as you may not free up as much as you’re expecting.

Switch to a retirement interest only mortgage: These are interest only mortgages, where you make lower monthly payments to cover the interest, and then after your death (or you move house or into a care home) the property will be sold to repay the outstanding debt. You need to be sure you can afford the repayments, and talk to your family about your decision.

Release equity: You can free up a lump sum to repay your mortgage, but make sure you understand the cost. The interest on the loan will roll up and need to be repaid after you die. Over a ten-year period, the amount payable on the loan can double.