Four in 10 mortgages are being taken out by borrowers who will still be repaying them past their retirement age

  • Figures described yesterday as ‘truly extraordinary’ by former pensions minister 

Four in ten mortgages are being taken out by borrowers who will still be repaying the loans past their retirement age, Bank of England figures show.

It means tens of thousands of home buyers have committed to repayments that stretch into their late 60s in order to afford to get on to the housing ladder or move up to a bigger property.

The figures were described yesterday as ‘truly extraordinary’ by former pensions minister Steve Webb, who said he was ‘genuinely shocked’. 

The Bank’s figures showed that nearly 50 per cent of mortgages issued in the fourth quarter of last year were for terms of 30 years or more. 

And for 40 per cent of new mortgages, ‘borrowers would be past the current state pension age at the end of their mortgage term’, equating to about 90,000 loans.

The Bank warned it could affect the future ‘resilience’ of borrowers and lenders.

Mr Webb, now a partner at pensions consultants LCP, said: ‘In the past you might have assumed that a lender would want a mortgage paid off by the time someone had stopped earning and reached pension age.

‘If it becomes the norm that a significant proportion of mortgages are planned to run on into retirement – and that’s before any further extensions during the lifetime to the mortgage – this would be a profound shift.’

He said mortgage lenders should be ‘thinking very carefully about the wisdom of offering mortgages which will need to be paid even when someone is no longer a wage earner’.

The figures come as buyers face a continuing squeeze from high interest rates and increases in the cost of living. 

In England, the average cost of a home was 8.3 times the average salary in 2023.

That has soared from 3.5 in 1997, but is lower than 2021 when it peaked at 9.1.

The lack of affordability has meant buyers are increasingly opting for longer-term mortgage deals.

In the past, 25-year mortgages were seen as the norm. Data published by trade body UK Finance this month showed that 23 per cent of first-time buyers were signing up to mortgages with terms of more than 35 years.

Lenders are also trying other ways to ease the criteria needed to buy a home, with Yorkshire Building Society launching a 99 per cent mortgage – meaning buyers could buy a property with a deposit of just 1 per cent.

In England, the average cost of a home was 8.3 times the average salary in 2023

The Bank of England assessed the trend of longer-term mortgages in the latest update from its financial policy committee, which monitors risks to the financial system. 

It said that while taking out longer-term home loans had ‘eased affordability constraints for many borrowers’ it could also ‘affect future borrower and lender resilience’.

Mr Webb said: ‘Although it can be very tempting to agree a long-term mortgage to make repayments affordable, this can store up serious problems for the future.

‘Someone reaching retirement with a balance on their mortgage may… end up cashing in pension pots to clear their mortgage debt, but this could leave them with even less to live on through their retirement.’

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