"Potentially a bigger worry is the sacrifices that people are making to ensure they are mortgage-free by the time retire which can include not saving into their pension and delaying retirement."
- Chris Bibby, managing director at Key
Over-55 homeowners are making major cutbacks to be mortgage free by the time they retire, new research from Key Later Life Finance shows.
Nearly three out of five (57%) say they are making sacrifices in the run-up to retirement in order to ensure they do not have to make repayments after they stop work. They are most likely to have cut general spending or spending on leisure and entertainment – around a third (31%) questioned say they have cut back on those categories.
However one in five (18%) admit they are only going to be mortgage free by the time they retire because they have pushed their retirement age back, while 14% say they are cutting back on pension saving to help clear their mortgage.
Industry data shows the numbers of paying people paying mortgages into retirement is set to grow – analysis of FCA data shows between 2018 and 2022 there was a 29% increase in the number of people taking their first step on the property ladder in their 50s.
UK Finance figures show that the percentage of mainstream mortgages extending beyond expected retirement ages has grown to more than 60% compared with around 20% 20 years ago.
How long into retirement will homeowners be paying mortgages?
Among those who do not expect to clear their mortgages, around 70% expect to still be paying off their loans for two years or more while only one in eight (13%) expect to be mortgage-free within 12 months of retirement.
The main reason identified by the research for over-55s not being able to pay off their mortgages by retirement is the ongoing cost of living crisis, with around half (50%) pointing to that as the key reason, while 30% say they have suffered pay cuts.
The research shows growing awareness of the solutions available in the later life lending market – around 44% questioned said they were aware of specialist mortgages, equity release and retirement interest-only mortgages and 11% plan to make some use of them in later life. This shows that despite growing awareness, usage of these solutions remains low.
Chris Bibby, managing director at Key, said: “Paying mortgages into retirement is clearly a growing issue with increasing numbers of homeowners expecting to still be making monthly repayments after they stop work.
“That might sound worrying but potentially a bigger worry is the sacrifices that people are making to ensure they are mortgage-free by the time retire which can include not saving into their pension and delaying retirement.
“That is very concerning and highlights the need for later life lending solutions which can provide better outcomes for over-55s with mortgages. There are more flexible ways to manage money in the run-up to retirement and to achieve a better balance. Over-55s should seek specialist advice on the growing number of options available which could help them to have the retirement they want.”
