More and more borrowers will be saddled with mortgage repayments in their 70s as longer-term loans become more popular, new research shows.
There has been a ‘significant’ increase in the number of people taking out mortgages with a term of 35 years or longer, which is raising the mortgage freedom age for many homeowners.
This data comes from financial adviser Quilter, who has made a Freedom of Information (FOI) request to the Financial Conduct Authority (FCA).
In the first nine months of 2024 alone, 22,103 mortgages were found with a term of 35 years or longer sold to people over 36 years old.
And between 2019 and 2024, there has been a 156% increase in the number of older borrowers taking out longer-term loans, according to Quilter.
It has raised concerns that people paying off mortgages in their 70s could face quality of life issues in retirement.
Quilter explained that a 36-year-old person taking out a £250,000 35-year mortgage at an interest rate of 4.75% could expect a monthly repayment of £1,145.
While this figure may change over the years in line with interest rates, Quilter explained that borrowers taking out a mortgage should now be confident that they can make these types of repayments until they are 71 – three years after they became eligible for the state pension and 14 years after they took out a mortgage. after they have reached the normal minimum retirement age.
Karen Noye, mortgage expert at Quilter, said it reinforces growing concerns about housing affordability, rising interest rates and changing socio-economic trends.
“The data paints a striking picture of how financial pressures are reshaping homeownership,” she says.
“The continued rise in property prices has made it increasingly difficult for buyers, especially those entering the market later in life, to afford homes without significantly extending the repayment period.
“At the same time, higher interest rates have increased monthly payments, causing many borrowers to extend their mortgage loans to 35 years in an effort to reduce these costs.
“In addition, demographic and societal shifts mean that many people are buying their first home much later in life. The average age of first-time homebuyers has risen steadily, reflecting the challenges of building savings in an expensive living environment. For older buyers, longer terms help alleviate affordability constraints, but also come with significant trade-offs.”
What you should pay attention to if you take out a mortgage with a longer term
Noye explained that the impact was “far-reaching,” with retirees on fixed incomes facing particular challenges.
Borrowers of these longer-term mortgages pay more interest over the life of the loan, and this increases the overall cost of homeownership. Noye said this could affect their ability to save for retirement or achieve other long-term financial goals.
There are also concerns that a generation entering retirement with outstanding mortgage debt could put additional pressure on state support systems and the housing market itself. Some may be forced to downsize or sell their properties to finance their later years.
But for those who opt for a longer term, there are some things you can do to ease the financial pressure. For example, with some mortgages this is possible for borrowers pay too muchwhich could help make post-retirement repayments more manageable, Noye said. Overpaying can also help reduce the amount of interest paid by shortening the overall term.
“If you are considering taking out a mortgage for 35 years or more, it is important to seek professional financial advice wherever possible,” she added.
“A financial planner can help you find the best mortgage product for your circumstances and keep an eye on your finances so you have the flexibility to overpay if you wish. At the same time, they can help you plan for a comfortable retirement, with the financial resources available to pay your mortgage repayments.”