Millions to pay mortgages into retirement as under-30s take ‘ultra-long’ loans

'Shocking' new figures shine a light on a problem that will likely hit many mortgage holders in their retirementSir Steve Webb via freedom of information request, show that the fastest-growing group of people taking out mortgages that will last into retirement is the under-30s.

Rising rates have squeezed household budgets, forcing many to extend the length of their mortgage terms to keep their monthly payments as low as possible. “We already know that millions of people are not saving enough for their retirement and if some of that limited retirement saving has to be used to clear a mortgage balance at retirement they will be at even greater risk of poverty in old age. Serious questions need to be asked of mortgage lenders as to whether this lending is really in the borrower’s best interests.”

Someone taking out a 40-year mortgage at 30 would not be set to pay it off until they reached the age of 70. In 20 years’ time, the state pension age is set to rise to 68, and it could then go up further. “Whilst longer mortgage terms can offer lower initial monthly repayments, the borrower will pay more in interest and have less disposable income to put into their pension if the mortgage runs for its full term.”

In a speech to the Building Societies Association last week, Emily Shepperd, chief operating officer of the Financial Conduct Authority said: “Alongside longer terms we also see a greater proportion of mortgages projected to mature around state retirement age. The projected median age of a first-time buyer at maturity is now 65 years old, up from 56 in 2005.

Source: Loan Digest (loandigest.net)

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