"With higher interest rates leading many people’s monthly mortgage payments to rise, this harsh reality is making it difficult for homeowners to prioritise retirement savings"
- Jim Boyd, CEO of the Equity Release Council
Almost one in four (22%) UK homeowners with a mortgage – equivalent to 2.8 million people – say repayments are stopping them from saving more for retirement, according to new findings from the Equity Release Council and Canada Life.
This figure has spiked since 2021, when only 14% said the same. It includes more than half a million (515,067) homeowners who are still paying a mortgage beyond the age of 55.
Almost one in six (16%) of this group say the burden of mortgage debt is holding them back from retiring completely, up from 14% in 2021. One in ten (10%) say their loan is stopping them from reducing their hours at work, more than double the number impacted in 2021 (4%).
Among all UK homeowners with a mortgage, 21% say their current mortgage debt is preventing them from affording a comfortable lifestyle from day-to-day, up from 13% in 2021.
Mortgage worries are also keeping 13% of people awake at night, preventing 11% from moving house and prompting 7% to pause family plans.
The study shows that, overwhelmingly, 90% of homeowners think it’s important to be mortgage-free by the time they retire.
However, the reality is likely to be very different with only two thirds (66%) of those with mortgages believing they will clear them before they retire, and just 60% of those aged 55 and over. Younger generations of mortgaged homeowners are also less likely to feel that it’s important to retire mortgage-free.
Among those aged 55 and over, one in five (20%) mortgaged homeowners – equivalent to 572,297 people – do not expect to retire mortgage-free, while another 19% are not sure.
The changing landscape is prompting more homeowners to bank on their property wealth and later life mortgages to help manage their money as they grow older.
Almost one in three (31%) UK consumers believe accessing property wealth in later life can improve their finances and boost their retirement income: a significant rise from 25% in 2021.
More than one in four (26%) now believe a later life mortgage could be a useful way to boost retirement income, an increase of five percentage points since 2021.
Over the last five years (2019-2023) over-55s have taken out 201,575 new equity release plans to support their later life finances. This level of activity represents a 30% rise compared with the previous five years, when 155,082 new plans were taken out between 2014-2018.
Jim Boyd, CEO of the Equity Release Council, commented: “With higher interest rates leading many people’s monthly mortgage payments to rise, this harsh reality is making it difficult for homeowners to prioritise retirement savings alongside their mortgage and wider bills.
“While this might be something they can just about manage in the short term, the real concern of this spike in mortgage costs is the strain it puts on people’s long-term financial resilience. It’s truly alarming that mortgage debt has become so uncomfortable that people are having to putting off starting a family, ending a relationship, or changing career. Having to push back key milestones and life moments like this is not only disheartening but could ultimately be detrimental to society as a whole.
“Rather than struggle against the tide, we need to recognise we are in a new era where the goal of becoming mortgage free will, for some people, be less important than the practical need to access property wealth in later life. With approximately £2.63 trillion of net housing wealth in homes owned by people aged 65 or over, there are clear signs that a shift in the national conscience is underway and property wealth is stepping into the spotlight for retirement planning conversations.”
