The Mortgage Time Bomb Facing Older Britons

As the number of people taking out long-term mortgage deals continues to rise, many homeowners are facing the daunting prospect of working well into their golden years to pay off their mortgages. This is a far cry from the traditional notion of retirement, where one can finally put their feet up and enjoy the fruits of their labor.

The recent interest rate hikes by the Bank of England have pushed high street mortgage rates to as high as 6.8%, leaving many homeowners reeling. Those who have taken out or renewed their mortgage in the past year have likely seen their monthly payments skyrocket.

A recent BoE report revealed nearly half of all mortgages issued in the last three months of 2023 were for 30 years or longer.

According to a recent report by the Bank of England, nearly half of all mortgages issued in the last three months of 2023 were for 30 years or longer, while two in five were issued to borrowers who would be past state pension age at the end of their mortgage term. This trend is particularly concerning, as it means that many people will be forced to work well into their 70s just to pay off their mortgage.

‘I’ll be paying until I’m 75’

One single homeowner from Hove, who asked not to give her name, told us that even though she had a “healthy deposit” for the flat she bought a year and a half ago, the mortgage was still a “big stretch” and she will be paying it off until she is 75.

Many people are facing the prospect of working well into their 70s just to pay off their mortgage.

“I can’t get it down, I need to keep working,” she said. “When I’m older I will have no other source of guaranteed income other than company pension and state pension, they won’t cover my mortgage and other expenses.”

Stephen Eblet’s mortgage is set to run until he is 68 - one year past his pension age. He says he has enough in his private pension to pay it off, but doing so will impact his finances in retirement.

The anxiety of having to pay off a mortgage in retirement is a heavy burden for many homeowners.

“My anxiety levels are rocketing,” he said. “I’m terribly worried about having to finish work early because of back problems and where that will leave me with a mortgage and how it will impact my lifestyle should I have to retire.”

Breaking Free from the Mortgage Cycle

While taking out a long-term mortgage may seem like a necessary evil for many homeowners, there are ways to break free from the cycle of debt. One option is to downsize to a less expensive home, which can help to cut off some of the debt. This is the plan for Danielle Steele, 39, from Swindon, who has a mortgage with her husband that is set to end when they are 71.

Downsizing to a less expensive home can be a viable option for those looking to pay off their mortgage sooner.

Father-of-four David Clarkson, 41, who lives in Flintshire, said he and his wife recently opted for a mortgage that will take them to 75, with a rate fixed for three years. He is hoping interest rates will drop in the next three to six years to allow them to pay it off in time.

Many homeowners are hoping that interest rates will drop in the near future, allowing them to pay off their mortgage sooner.

Steve, 51, from Scotland, said his mortgage goes three years past his pension age - but it’s a “calculated risk.” “We hope we’ll get inheritance to pay off our mortgage sooner. Not that you want older relatives to die, but it seems a lot of people need to rely on that these days,” he said.

The High Cost of Long-Term Mortgages

Gerard Boon, managing director of online mortgage broker Boon Brokers, says staff have seen a rise in clients reporting that they’ll have to work longer and later in life to settle their bills.

Mortgage brokers are seeing a rise in clients who will have to work longer and later in life to pay off their mortgages.

“We always ask how long people are willing to work. Five or six years ago or even just pre-COVID… people would normally say their retirement age [is] 66 or 67 years old and that was fairly standard. But now, more often than not, people are saying [they’ll] have to work until 70 or maybe 75,” he said.

He noted that some lenders have “cottoned on” to this fact and are raising the age cap on their mortgages as a result. Others remain more cautious, such as Halifax, which recently cut the cap from 75 to 70 years for some of its products.

Some lenders are raising the age cap on their mortgages, while others remain more cautious.

Mr. Boon said his advice to clients is always to opt for a shorter term if possible, as they will pay “far more” interest over the course of a longer-term deal - but for many, it’s just not feasible.

“I would say the vast majority of applications, especially for first-time buyers in the age range of 20 to 25, they’ve opted for the longest time period,” he said. “People are trying to get their costs down… I think a lot of people are taking these longer mortgage terms with the hopes that they’ll be able to refinance at a later date to shorten the term.”

The Future of Mortgage Lending

As the mortgage landscape continues to evolve, it’s clear that lenders will need to adapt to the changing needs of homeowners. With many people facing the prospect of working well into their 70s just to pay off their mortgage, it’s time for lenders to rethink their approach to mortgage lending.

The future of mortgage lending will need to adapt to the changing needs of homeowners.

What are lenders’ rules around retirement age? UK lenders will have age limits for mortgage lending - one being a cap on the maximum age you can take one out, and another for paying them off. Different lenders will have different rules on what age they require the debt to be paid by. The upper age limit for paying off a mortgage typically ranges between 70 and 85, while most will not let you enter a new deal past the age of 80. Individual circumstances, such as income, employment status, and credit history, will also affect eligibility as they would for any borrower.