Longer mortgages for those retiring later

THERE is no question that the coronavirus pandemic will have an impact on the way homeowners are able to repay their mortgages.

Many borrowers have been taking advantage of the mortgage holidays being offered by lenders and although the initial holiday was only for three months, there is no doubt that many people will be looking for longer holidays due to the impact that the virus had had on their income.

Added to this is the fact that many borrowers will, when it comes time to renew or renegotiate their mortgage deal, be looking for a longer term loan to keep monthly costs down.

All of this means that there is likely to be an increase in the numbers of people who are still paying mortgages into their 60s and even 70s.

In fact, this was happening to a greater extent even before the pandemic hit, with the average age of first-time buyers increasing as many youngsters struggled to get their foot on the first rung of the housing ladder.

It seems as though the banks and building societies involved in lending money for mortgage purposes might have recognised this change, given that many of them have been increasing the maximum age by which they expect loans to be repaid.

As well as the issues with affordability, it’s also the case that people are living longer and retiring later and so will have income beyond their early 60s, meaning that mortgages can be affordable when people are older.

Of course, the other reason that people might want to delay paying off their mortgages until later is that loans are really quite cheap at the moment and it might be that people can find something else to do with some their money.

If, for example, you have money being invested that is earning you five per cent and your mortgage is costing you two per cent, then why would you use the high-earning money to repay a low-cost loan? If your investments continue to earn five per cent while mortgage rates rise to seven per cent, then you might want to reconsider.