‘Shocking’ number of mortgages take borrowers into retirement

Homebuyers are increasingly being forced to “gamble” with their retirement prospects to get on the housing ladder by taking on ultra-long mortgages lasting beyond the end of their working life, it was claimed yesterday.

More than a million mortgages that stretch beyond the borrower’s state pension age have been arranged in the past three years, figures show.

The data, obtained via a freedom of information (FoI) request by the former Liberal Democrat pensions minister Steve Webb, shows the proportion of home loans arranged to last into retirement increased from 31% in the final quarter of 2021 to 42% in the same period last year. “Serious questions need to be asked of mortgage lenders as to whether this lending is really in the borrower’s best interests,” he said.

Among 30- to 39-year-olds, who would typically be expected to be taking out their first mortgage, 30,943 home loans were arranged to last beyond state pension age, with 39% of those granted in the last three months of 2023. This compared with 23% two years earlier.

The figures were higher for 40- to 49-year-olds, with 32,305 new mortgages, or 57% of the market, arranged beyond typical retirement age. In 2021, the proportion was 42%.

Older age groups were more likely to have home loans that stretched into retirement, but the numbers were far smaller.

Rising house prices have fuelled an increase in the number of borrowers taking on ultra-long mortgage terms in recent years, and higher interest rates have fuelled the trend. Arranging a mortgage over a longer period reduces monthly repayments.

Webb, a partner at the pension consultants LCP, submitted an FoI request to the Bank of England after it reported that two in five borrowers had taken out loans that would run beyond state pension age. Figures for the final quarters of 2021, 2022 and 2023 showed all new residential mortgages issued in those periods.

The figures included remortgages, so there could be some borrowers counted twice.

Webb said that if the figures for all quarters were similar, more than 1m mortgages running beyond pension age had been issued, and this could cause problems when borrowers reached later life.

Although a mortgage taken out by someone in their 30s was unlikely to be their last, Webb said the risk to retirement depended on what happened over the course of their working life and whether or not they were able to shorten the term.

“The huge number of mortgages which run past state pension age is shocking,” he said. “The challenge of getting on the housing ladder is forcing large numbers of young homebuyers 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.”