One million face paying mortgages into retirement, new figures show

There are concerns that some people may not be able to afford to service a mortgage once they retire

42 per cent of new mortgages in the fourth quarter of 2023 – or 91,394 – had terms going beyond the state pension age

Young home buyers are being forced to gamble with their retirement prospects by taking on ultra-long mortgages, according to a former pensions minister.

According to freedom of information (FOI) data supplied by the Bank of England, 42 per cent of new mortgages in the fourth quarter of 2023 – or 91,394 – had terms going beyond the state pension age.

In the same period a year earlier, 38 per cent of new mortgages had a term ending beyond state pension age and in the same period in 2021, 31 per cent of new mortgages went beyond state pension age.

The figures were obtained by Sir Steve Webb, a former Liberal Democrat pensions minister.

He said that, based on the figures obtained for the last three months of each year, this suggests that over the last three years over one million new mortgages have been issued with end dates beyond state pension age.

In the fourth quarter of 2023, people aged 30 to 39 accounted for 30,943 new mortgages lasting beyond state pension age and people aged 40 to 40 accounted for 32,305.

Under-30s made up 3,676 of these mortgages, people aged 50 to 59 accounted for 18,854, 60 to 69-year-olds made up 4,955 and people aged 70-plus made up 661.

Sir Steve highlighted concerns that some people may not be able to afford to service a mortgage once they retire and will raid their pension savings to clear their mortgage, leaving them with less to live on in old age.

The data was based on mortgage figures supplied by the Financial Conduct Authority (FCA) to the Bank of England.

Although a mortgage taken out in someone’s 30s, perhaps as a first-time buyer, is highly unlikely to be someone’s last mortgage, the risk to retirement depends on what happens over the course of their working life and whether or not they are able to shorten the term, Sir Steve said.

He said that, in the past, when people had mostly paid off their mortgage before pension age, they could spend their final years in work boosting their pension pot.

Sir Steve said: “The huge number of mortgages which run past state pension age is shocking.

“The challenge of getting on the housing ladder is forcing large numbers of young home buyers to gamble with their retirement prospects by taking on ultra-long mortgages.

“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.”

Last autumn, the Bank of England’s Financial Policy Committee (FPC) noted that since the first quarter of 2021, the proportion of new mortgage lending with a term of 35 years or more had increased by eight percentage points, to 12 per cent by the second quarter of 2023.

Property firm Savills recently said that across Britain, property values are expected to have increased by just over a fifth (21.6 per cent) on average by the end of 2028.

It said the average house price could increase by £61,500, from £285,000 in 2023 to £346,500 by 2028.