One million ultra-long mortgages will run past the state retirement age
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A ‘schocking’ number of ultra-long mortgages are due to run past the state pension age, figures show.
Around a million property owners have gambled with their retirement prospects by taking on the home loans in the past three years, according to analysis of Bank of England data.
Ultra-long mortgages were originally introduced to help young people get on to the housing market.
But the terms – which can stretch to up to 40 years – could force homeowners to raid their pension pots to make mortgage payments and leave them with less to live on in old age.
Some 42 per cent of mortgages taken out in the final three months of last year had terms going beyond the retirement age, which is currently 66.
That accounted for 91,394 new loans, figures released under the Freedom of Information Act showed.
A year earlier, 38 per cent of mortgages had a term ending beyond state pension age. In the same period in 2021, it was 31 per cent.
Sir Steve Webb, a partner at consultancy LCP and former Lib Dem pensions minister, said: ‘The huge number of mortgages which run past state pension age is shocking. The challenge of getting on the housing ladder is forcing large numbers of young home buyers 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 an even greater risk of poverty in old age.’
He added: ‘Serious questions need to be asked of mortgage lenders as to whether this lending is really in the borrower’s best interests.’
Last week Emily Shepperd, chief operating officer at the Financial Conduct Authority, said: ‘Lending into retirement is moving from a niche to a norm.’
FCA figures show the proportion of mortgage customers over 67 is currently less than 2 per cent. That is expected to rise to 5 per cent by 2040 and nearly 10 per cent by 2050.
But the Bank of England is tipped to cut interest rates next month, which would reduce mortgage costs.
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