2nd April 2014
Borrowers over 65 took out fewer than 16,000 mortgages in the UK last year worth around £1.3bn, the Lenders’ trade body the Council of Mortgage Lenders says. Some 4.5% of those over 65 are paying for a mortgage. The CML has analysed data from its regulated mortgage survey (RMS) which shows that borrowing by age band peaks for those in their 30s, with those in this group twice as likely to take out a mortgage as those in their 50s.
Chart One: Mortgage lending to those aged 65 and over, by volume and value
Perhaps not surprisingly, lifetime mortgages feature prominently in lending to people in this age group accounting for nearly 40% of all lending to those aged over 65.
For the very small amount of lending to the very old – customers aged 85 and over – the proportion accounted for by lifetime mortgages – or equity release – has grown since 2007 and comprised 90% of the total last year. Right to Buy purchases also account for a higher proportion of loans taken out by older customers.
The CML has also taken data from the English Housing Survey to provide a breakdown of the proportion in each age group currently paying off a mortgage.
The data shows changes over time in the profile of those holding mortgage debt and, in particular a decline in the proportion of those aged 25-44 with a mortgage (with the decline more pronounced among those aged 25-34). These shifts in the lending profile over time largely reflect the sharp fall in house purchase activity since the credit crunch, after which the number of first-time buyers halved.
Chart Two: Adults buying a home with a mortgage in England, % by age
Source: English Housing Survey
Combining its data and the English Housing Survey, the CML’s conclusion is that the number of new mortgages taken out by those aged 65 and over is modest and declining. However, the stock of mortgages held by borrowers in this age group is larger (at around 4.5% and pushing higher) than their share of new lending, which amounts to only a little over 1%.
The increase in the number of loans extending into retirement has been driven partly by a combination of those taking out a mortgage getting older, and some customers taking out loans with longer repayment terms. Although the average age of a first-time buyer has more or less remained constant since 2007 (fluctuating only slightly between 29 and 30), there has been a tick up since 2008 in the average age of both movers and those remortaging.
There has also been a notable decline in the proportion of very young first-time buyers (those aged under 25) since 2006, and an increase in activity by those in their late 20s and early 30s. The data shows that the proportion of first-time buyers taking out a mortgage with a term of more than 25 years has increased from around 30% in 2006 to around 50% today. This may partly reflect the reality that today’s first-time buyers expect to retire at an older age than their parents.
Chart Three: The number and proportion of mortgages extending to age 65 and beyond
The CML concludes: “Our data shows that the number of people borrowing into retirement has grown in recent years, partly because some customers are taking out loans later in life. There has also been an increase in the number of those taking out mortgages for longer terms. But the picture has become less clear with the upward drift in state pension age, and the growing expectations that people will retire at a later age than before.
“Following the announcement by the chancellor of more liberal pension rules in his recent Budget, there has been a lot of speculation that one result could be an increase in housing market activity – and borrowing – by older customers. At this stage, however, it is too early to predict how the market may be affected by the change of rules.”