Pensioners face paying home loan in their 70s

SOARING property prices mean the next generation of homeowners may be paying their mortgages into their 70s with their pensions, a study shows.

The demand for longer mortgage terms of 35 years instead of the traditional 25 years has jumped 75 per cent as cash-strapped owners want to keep monthly payments as low as possible.

A 35-year-old taking out a 35-year long mortgage would be 70 when the last payment is due.

And the standard of living among retirees could decline significantly as they struggle to pay a mortgage out of a fixed pension, experts warn.

Data from lenders indicates that the average age of new buyers has risen to 32, from 29 a decade earlier, says online mortgage broker Trussle.

Reveal

The trend could be exacerbated by the cost-of-living crisis, which is likely to see the age of first-time buyers keep rising.

Financial Conduct Authority data reveal a record 63,158 35-year mortgages were taken out by new buyers – a rise of 75 per cent year-on-year.

Borrowing £150,000 over 25 years on a repayment basis at a rate of 2.74 per cent equates to a monthly payment of £691 and the total cost would be £207,359.

Lengthening the mortgage term to 35 years cuts the monthly payment to £555 but the total cost rises to £233,407.

Rob Peters, of Simple Fast Mortgage, warned that many owners would just have to keep working longer to afford their repayments.

He said: “A mortgage term can be anywhere up to 40 years, and they often need to be so they are affordable as house prices rise much faster than wages.”

The state pension age for men and women is set to reach 67 by 2028.