The number of mortgage borrowers taking out loans that they will still be repaying in retirement have soared by 156% in the last five years, as rising property prices and interest rates put pressure on household finances.
Analysis by Quilter of Financial Conduct Authority (FCA) data revealed a significant rise in the number of people taking out a mortgage with a term of 35 years or more who will be at least 71 years old before the debt is repaid.
In the first nine months of 2024 alone, according to data released through a Freedom of Information request, 22,103 mortgages with a term of 35 years or more were sold to people aged over age 36, which is higher than any previous full year since 2018.
Over a five-year period since 2019, there has been a 156% increase in the number of older borrowers taking out longer loan terms.
Karen Noye, mortgage expert at Quilter, said: “The sharp increase in the number of mortgages sold to individuals over the age of 36 with a 35-year term in the UK highlights growing concerns about housing affordability, rising interest rates, and changing socioeconomic trends.
“From just over 5,900 such mortgages issued in 2020 to more than 22,000 in the first nine months of 2024 alone, the data paints a striking picture of how financial pressures are reshaping homeownership.”
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Reality of paying a mortgage in retirement
Those taking out a mortgage for 35 years or more from the age of 36 will be at least 71 when the debt is fully repaid, which, according to Quilter, creates a risk that their monthly repayments could adversely affect their quality of life in retirement.
A 36-year-old borrower who takes out a £250,000 mortgage with a 35-year term at an interest rate matching the current Bank of England base rate of 4.75% could expect a monthly repayment of £1,145.
Although the figure will fluctuate, borrowers must be confident they can afford to make their repayments until the age of 71, 14 years after they reach the normal minimum pension age.
Noye said: “The continued rise in property prices has made it increasingly difficult for buyers, particularly those entering the market later in life, to afford homes without significantly extending the repayment term.
“At the same time, higher interest rates have pushed up monthly payments, prompting many borrowers to stretch their mortgages to 35 years in an effort to reduce these costs.
“Retirees on fixed incomes may find it challenging to manage mortgage payments alongside other living costs, particularly if they have not accounted for this in their retirement planning.”
Speaking at the Building Societies Association last year, Emily Shepherd, the FCA’s chief operating officer, warned that the potential risk of longer mortgage terms and lending into retirement should be managed so it did become a problem in the future.
