Increasing numbers of home buyers will be paying their mortgage into their seventies, according to analysis of Financial Conduct Authority data.
A Freedom of Information request by wealth manager Quilter revealed a significant rise in the number of people taking out mortgages with a term of 35 years or more.
In the first nine months of 2024 some 22,103 mortgages with a term of 35 years or more were given to people aged 36 or older.
Since 2019 there has been a 156 per cent increase in the number of borrowers over 36 taking out longer loan terms, according to Quilter’s analysis.
The mortgage term is the number of years someone agrees to repay their mortgage for. A term of 25 years used to be the most common, but today’s buyers are increasingly likely to opt for a term of 30 years or longer.
This reduces their monthly payments, but means they pay more overall because the interest has longer to accumulate.
Growing trend: In the first nine months of 2024 alone, 22,103 mortgages with a term of 35 years or more were sold to people aged over age 36
Those taking out a mortgage for 35 years or more aged 36-plus will be at least 71 when it is fully repaid – unless they are able to make overpayments and reduce the length of the term.
It is likely that higher mortgage rates combined with already high house prices is behind this trend for longer mortgage terms.
The average home costs 6.55 times than the average income, according to the latest figures from mortgage lender Halifax, and in some areas of the country this can be as high as 17.5 times.
While this has edged lower in recent years thanks to earnings outpacing house price growth, higher mortgage rates have driven up monthly repayments.
Most borrowers are now securing mortgage rates of between 4 and 5.5 per cent, where three years ago they were getting rates of between 1 and 2 per cent.
Karen Noye, mortgage expert at Quilter says: ‘The sharp increase in the number of mortgages sold to individuals over the age of 36 with a 35-year term in the UK highlights growing concerns about housing affordability, rising interest rates, and changing socio-economic trends.
‘The continued rise in property prices has made it increasingly difficult for buyers, particularly those entering the market later in life, to afford homes without significantly extending the repayment term.
‘At the same time, higher interest rates have pushed up monthly payments, prompting many borrowers to stretch their mortgages to 35 years in an effort to reduce these costs.’
The cost of a longer mortgage
Taking a longer mortgage term can mean paying back tens or even hundreds of thousands more.
Someone with a £200,000 mortgage paying 5 per cent interest over 20 years would face monthly repayments of £1,320, paying a total of £316,876.
A borrower with the same £200,000 mortgage paying the same interest rate over a 40-year term would face monthly repayments of £965. However, they would pay £463,136 over the lifespan of the mortgage: £146,260 more than on a 20-year term.
Year | 35-year mortgages or more sold to 36 year olds and over |
---|---|
2018 | 15,307 |
2019 | 8,639 |
2020 | 5,911 |
2021 | 11,092 |
2022 | 16,170 |
2023 | 21,289 |
2024 (Jan – September) | 22,103 |
Source: FCA & Quilter |
While their interest rate would likely change during this time if they remortgaged or fell on to their lender’s standard variable rate, the principle remains the same.
Our True Cost Mortgage Calculator allows you to compare how your mortgage costs would change over different term lengths.
The risk of paying a mortgage into later life
There is a risk that paying a mortgage into one’s seventies could adversely affect their quality of life in retirement.
Anyone taking a mortgage term that will end in their seventies will need to be confident they can afford to make their repayments until the end – which may mean continuing to work for longer than planned.
The state pension age will soon be 67 and it is likely to keep increasing as people live longer.
The full state pension is £221.20 a week for the 2025/26 tax year, or approximately £960 per month.
Karen Noye of Quilter says retirees on the state pension alone are likely to find it difficult to repay a mortgage
While the state pension will increase over the 35-year mortgage period, so too will the everyday cost of living.
This makes it unlikely that the state pension alone will cover a mortgage repayment alongside everyday living costs, leaving people heavily reliant on savings or other income.
‘The ramifications of this shift are far-reaching, especially as more people approach retirement age with mortgage debt still to repay,’ says Noye.
‘Retirees on fixed incomes may find it challenging to manage mortgage payments alongside other living costs, particularly if they have not accounted for this in their retirement planning.
‘Furthermore, longer mortgage terms mean borrowers pay significantly more in interest over the life of the loan.
‘For many, this could erode their ability to save for retirement or meet other long-term financial goals.’
Cutting down a mortgage term
The upside of taking a long mortgage term is that you can shorten it down the line, if your finances allow.
Borrowers may find they can reduce the term when they remortgage, perhaps because their income has improved and they can commit to higher repayments, or because they have received an inheritance which they can use to pay off a chunk of their home loan.
Mortgage borrowers are also able to make regular or one-off overpayments to reduce the debt, within certain limits.
Most mortgage lenders allow their customers to make overpayments of 10 per cent of the total mortgage amount each year without incurring an early repayment charge. Some are more flexible and others may be more restrictive.
Reducing the balance before retirement could help make mortgage payments more manageable past retirement age.
Noye adds: ‘If you are considering committing to a mortgage for 35 years or more, it is important to seek professional financial advice where possible.
‘A financial planner can help you find the best mortgage for your circumstances, and consider your finances in the round to ensure you have the flexibility to overpay should you wish to.
‘At the same time, they can help you plan for a comfortable retirement with the finances available to afford your mortgage repayments.’
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