16th June 2015
More than half of borrowers expect they will be saddled with mortgage debts into their retirement, a new survey reveals.
The Building Societies Association found that 52% of 25-34 year olds believe they may need a mortgage that lasts into retirement.
Over a quarter (27%) of people in this age group also think they may struggle getting a mortgage into retirement because their credit history, income level or age will count against them.
Paul Broadhead, head of mortgage policy at the BSA, says: “We are all now living much longer and getting on to the property ladder later in life. Many younger buyers are realising that they may not be able to pay off their mortgage until after they retire. As the average age of a first-time buyer increases, borrowing into retirement is becoming the ‘new normal’, rather than a niche form of lending.
“The Mortgage Market Review, introduced just over a year ago, has had an impact on borrowing. The application process is much more rigorous and borrowers now have to contend with strict affordability assessments that factor in other commitments. This means they may have to borrow over a longer term to secure a mortgage.
“These demographic and regulatory changes mean some borrowers may find their mortgage application is rejected if they need to borrow into their anticipated retirement. The mortgage market needs to change to cater for this shift in borrowing.”
Broadhead adds: “Despite the concern shown by younger homebuyers, it isn’t all doom and gloom. The building society sector tends to be more flexible and willing to offer mortgages that extend into retirement. Some societies do not have upper age limits, tend to take the case-by-case approach to applications and are keen on developing long-term products that cater to first-time buyers who may want or need to borrow into older age. The sector is also keen to debunk the myth that once you are over 40 you are ‘too old to get a mortgage’.
“Given that the population is aging and house purchase later in life is more common, the Government, regulators and the financial services sector needs to cater for this change. Paying off a mortgage by the age of 65 is no longer a reality for many.”