The numbers of people taking out mortgages that would run past the state pension age rose to 42% of all home loans in the final three months of last year from 31% in the final quarter of 2021, according to Bank of England data the consultancy gained from a Freedom of Information request.   

The fastest growing group of people taking up these mortgages are those aged under 40, many of whom are first-time-buyers, the firm points out.  

The number of homebuyers under 30 using ultra long mortgages jumped 139% to 3,676 in the final quarter of last year compared to three years ago.  

While the number aged between 30 and 39 lifted 29% to 30,943 over the same period

The firm adds that more recent data from the BoE that new mortgages granted to people in their thirties that run past pension age is now around 39%.  

The advisor says: “There is a risk that these groups will not be able to afford to service a mortgage once they retire and will raid their pension savings to clear their mortgage, leaving them with less to live on in old age.”  

It adds that “the risk to retirement depends on what happens over the course of a borrower’s working life, and whether or not they are able to shorten the term”.    

The consultancy lays out other concerns raised by ultra-low mortgages:   

• Those who have mortgage debt at retirement may use modest auto-enrolment pension pots to clear the debt — leaving little for retirement itself and jeopardising their later life standard of living  
• Growing numbers of people drop out of the labour market before reaching pension age, which puts extra pressure on keeping up payments on a long-term outstanding mortgage  
• Mortgage lenders have little certainty as to the future pension income of someone in their thirties today — so cannot know if borrowers will have enough income in retirement to service a mortgage debt  
• Previously, when people mostly paid off their mortgage before pension age, they could spend their final years in work boosting their pension pot. Even if mortgages only run to pension age — and not beyond — it deprives people of a period pre-retirement when they might have paid off their mortgage and be able to boost their pension  

LCP partner and former pensions minister Steve Webb, who lodged the FOI request, says: “The huge number of mortgages which run past state pension age is shocking.     

“The challenge of getting on the housing ladder is forcing large numbers of young home buyers to gamble with their retirement prospects by taking on ultra-long mortgages. 

“We already know that millions of people are not saving enough for their retirement and if some of that limited retirement saving has to be used to clear a mortgage balance at retirement they will be at even greater risk of poverty in old age.     

“Serious questions need to be asked of mortgage lenders as to whether this lending is really in the borrower’s best interests”.  

The number of new mortgages in the final quarter of 2021 totalled 88,933 (with 31% classed as long-term home loans), new mortgages in the final quarter of 2022 hit 113,916 (38% as long-term home loans) and new mortgages in the final quarter of 2023 totalled 91,394 (42% as long-term home loans). 

The consultancy multiplied these quarterly figures by four to get annual figures, suggesting that over the last three years over one million new mortgages have been issued with end dates beyond state pension age.