First-time buyers may be left paying off their mortgages into their retirement due to the rising age of people coming onto the property ladder and homeowners seeking longer mortgages, according to Trussle.
The average age of FTBs has risen to 32, up from 29 a decade earlier, says the online mortgage broker citing data from Halifax.
The broker says: “This increase is unsurprising as house price inflation has caused the age of FTBs to rise sharply. Worryingly, this trend could be exacerbated further by the current cost of living crisis, and we will likely see the age of FTBs continue to increase.”
House prices in the UK rose by 10.9% on an annual basis, with the average property in the UK now valued at £276,755, according to data from the government’s UK Property Transactions Statistics data released last week.
Trussle adds that FTBs sought longer 35-year mortgages in an attempt to combat spiralling house prices during the stamp duty holiday, which tapered to an end last September.
It cites data from the Financial Conduct Authority during this period, which reveals a record 63,158 35-year mortgages were taken out by FTBs, a 75% year-on-year jump.
The broker points out that while this move will make these homebuyers’ monthly repayments more affordable in the short term, they will ultimately repay more over the course of their mortgage.
It adds that the age at which people retire is projected to increase over the coming decades as the government seeks to balance the cost of an ageing population by lengthening the time people spend in work. The state pension age for men is currently set to reach 67 by 2028.
The broker says: “People could be paying off their mortgages during periods of life when people traditionally begin to focus on saving more for retirement. However, the reality could be that we also see people paying their mortgage during retirement.”
Hargreaves Lansdown senior pensions and retirement analyst Helen Morrissey says: “This is a worrying trend with real long-term financial implications for younger generations. Soaring house prices means people are buying their first home later and later and having to resort to longer mortgage periods to keep their costs manageable.
“At this point, retirement seems like a very long way away but the risk is that pension contributions become a casualty of keeping on top of mortgage payments.
“Many people will be able to work for longer to get their mortgages paid off before retiring but some people may find they have to stop working earlier than they hoped due to ill health and this can cause them problems if they still have a mortgage to pay and they could struggle if their pension income is low.
“Wherever possible people should try to get their mortgage paid off before retiring, so making overpayments could be a good option.”
Trussle head of mortgage operations Amanda Aumonier adds: “This is an alarming trend that has been brewing for years. When purchasing a home, buyers naturally think about the here and now, which typically means looking for ways to keep their payments as low as possible.
“But, while taking out a longer-term mortgage can be an effective way to keep short term costs low, you will end up paying more back in the long term. Not only this, but you could also still be paying off your mortgage during a period of life when your income begins to drop.
“This new data shows that the ramifications will reverberate for decades to come and will lead to consequences not yet accounted for. If this trend is to be addressed, we will need to see urgent action on affordability today.”
