‘Anxiety levels are soaring’ – older Britons face mortgage squeeze
Katie Williams, Money Team
Many of us envision retirement as a peaceful end after decades of hard work.
But an increasing number of mortgage holders are being forced to give up their leisure time as they have no choice but to work past pension age in order to repay their long-term mortgages.
Homeowners are still reeling from a painful interest rate hike by the Bank of England that has pushed general mortgage rates up to 6.8%. Anyone who has taken out or renewed a mortgage in the past year is likely to have seen their monthly repayments skyrocket.
A recent Bank of England report revealed that almost half of mortgages issued in the last three months of 2023 were for terms of 30 years or more, and two in five were issued to borrowers who will be over state pension age at the end of the mortgage term.
Separate figures from UK Finance showed that 41,580 first-time home buyers in the fourth quarter of 2023 had a mortgage of 30 years or more, of which around 15,700 (38%) had a mortgage of 35 years or more.
“I’ll keep paying until I’m 75.”
One single homeowner from Hove, who asked not to be named, said despite having a “good down payment” on the flat he bought 18 months ago, his mortgage remains a “huge burden” and he will be paying it off until he is 75.
“I’m not comfortable, so I have to keep trying,” she said.
“As we get older, we will no longer have a guaranteed source of income apart from our company pension and state pension, and will be unable to cover our mortgage and other expenses.”
Stephen Eblett’s mortgage is due to last until he turns 68, one year after pension age. Mr Eblett has enough money in his personal pension to pay off his mortgage, but says doing so will affect his finances in retirement.
The 62-year-old self-employed plumber, from Greenthorpe, near Scarborough, suffers from musculoskeletal pain and is worried about whether he will be able to “make it to the finish line” at 67, a retirement age that is “way too high” for manual workers.
“My anxiety levels have sky rocketed,” he said. “I’m worried about having to leave work early because of my back pain, what will happen to my mortgage, and how it will affect my life if I have to quit my job.”
Inheritances, downsizing and falling interest rates – what are Brits planning to do to shorten their mortgage repayment period?
Taking out a long-term mortgage does not necessarily mean you will no longer have to make repayments.
At the end of the fixed-rate period, you have the option to shorten the term or move to a less expensive home to reduce some of the debt.
Danielle Steele, 39, from Swindon, is one of them. She has a mortgage with her husband and is now due to pay it off at 71.
They plan to downsize once their two daughters leave home in about 10 years, but aren’t too worried about it at the moment.
David Clarkson, 41, a father of four from Flintshire, said he and his wife had recently taken out a three-year fixed-rate mortgage to stay in their home until they were 75, which has reduced their payments by less than £150 compared to before.
He is hopeful that interest rates will fall within the next three to six years, allowing him to repay the loan on time.
“So far we haven’t had to change many aspects of our daily lives, but that will change in the next few years if wages don’t increase and prices continue to rise,” he said.
Steve, 51, from Scotland, whose mortgage payments continue three years past pension age, said it was a “calculated risk”.
“Hopefully I can pay off my mortgage quickly with the inheritance. I don’t want my elderly relatives to pass away, but it seems a lot of people these days have to rely on inheritances,” he said.
Longer terms mean higher interest rates
Gerald Boone, director of online mortgage brokerage Boone Brokers, says his staff are seeing an increase in clients reporting they are having to work longer and at an older age to pay their bills.
“We always ask how long are you willing to work and five or six years ago, or even pre-COVID, people would usually answer with their retirement age. [is] 66 or 67 was the norm. But now, many people say: [they’ll] “I have to work until I’m 70 or 75,” he said.
He noted that some lenders have “woke up” to this fact and have raised the maximum age limits for mortgages as a result. Others, such as Halifax, have remained more cautious, and recently lowered the limit on some products from 75 to 70 years old.
Boone said he advises clients to always choose shorter terms when possible because they will pay “much more” in interest on longer-term contracts, but that’s not realistic for many.
“I think the majority of applications, particularly from first-time homebuyers aged 20 to 25, are choosing the longest period,” he said.
“People are trying to get costs down… I think a lot of people are taking out these longer-term mortgages in the hope that they can refinance at a later date and shorten the term.”
What are the lender’s rules regarding retirement age?
UK financial institutions impose age restrictions on mortgage lending, one on the maximum age at which a person can take out a mortgage, and another on the time limit for repaying the mortgage.
Different lenders have different rules about the age at which you have to repay your debt.
The maximum age for repaying a mortgage is usually between 70 and 85 years old, but most financial institutions will not enter into a new contract with anyone over 80 years old.
Your personal circumstances, including your income, employment status and credit history, will also affect your eligibility, just like any other borrower.
