Warning over 40 year mortgages that will see OAPs weighed down with monthly repayments | Personal Finance | Finance

[ad_1]

Thousands of Britain’s elderly face still having to make mortgage payments long after they have retired, according to official figures.

An increasing number of home buyers are taking out mortgages of up to 40 years in order to make monthly payments affordable.

As a result, more people will still be making payments well into the 70s and even 80s.

Four in ten mortgages are being taken out by borrowers who will be repaying the loans past their retirement age, according to new figures from the Bank of England.

The Bank’s figures showed that nearly 50 percent of home loans issued in the fourth quarter of 2023 were for terms of 30 years or more.

It indicated that for 40 percent of new mortgages, “borrowers would be past the current state pension age at the end of their mortgage term”. This equates to about 90,000 loans.

Former Lib-Dem pensions minister Steve Webb said he was “genuinely shocked” by the figures.

Mr Webb, now a partner at pensions consultants LCP, said: “In the past you might have assumed that a lender would want a mortgage paid off by the time someone had stopped earning and reached pension age.

“If it becomes the norm that a significant proportion of mortgages are planned to run on into retirement – and that’s before any further extensions during the lifetime to the mortgage – this would be a profound shift.”

He told the Daily Mail that mortgage lenders should be “thinking very carefully about the wisdom of offering mortgages which will need to be paid even when someone is no longer a wage earner”.

The figures come against the background of the fact buyers are having to take on massive mortgages to move up the property ladder..

In England, the average cost of a home has risen from 3.5 times average salary to some 8.3 times in 2023.

Data published by trade body UK Finance this month showed that 23 percent of first-time buyers are signing up to mortgages with terms of more than 35 years.

Mr Webb added: “Although it can be very tempting to agree a long-term mortgage to make repayments affordable, this can store up serious problems for the future.

“Someone reaching retirement with a balance on their mortgage may… end up cashing in pension pots to clear their mortgage debt, but this could leave them with even less to live on through their retirement.”

[ad_2]

Source link