Taking out a Mortgage in Your Later Years – Is it a Path to a Better Lifestyle?
According to a report by the Equity Release Council, the number of people expecting to have paid off their mortgages by retirement age is set to significantly decrease in the future. Five thousand participants took part in the study, carried out by the lifetime mortgage trade body, which found that 45% of homeowners under the age of 40, and 29% of over 40’s purchased homes a lot later than they had expected or would have liked to.
The research shows a third of all homeowners are not confident that they will be able to completely pay off their mortgages by retirement age. Many have completely ruled it out, with 20% feeling that a mortgage free retirement is completely unrealistic and unachievable.
The report suggests that buyers under 40 were less concerned that they may still be in debt after retirement. Jim Boyd, ERC chief executive, said “There are clear signs that paying a mortgage in retirement is no longer a taboo,”
He added, ‘One in four mortgaged homeowners said they don’t mind if they are still paying off their loan in later life, while 47 per cent believe their generation’s attitude to debt in later life is more accepting than their parents’.
The research showed that 70% of people with mortgages were comfortable with the level of their mortgage debt, increasing to 75% among the over 50’s. Many stated that they felt that taking out a mortgage in later life could significantly benefit them with nearly one third suggesting that it may improve their overall lifestyle. Just under one third of participants felt that it could help them to access funds to help out family members.
“Lifetime and retirement mortgages allow people to make the most of property as a source of wealth as well as a home. Our findings suggest later life lending products are likely to be even more important for future generations of retired homeowners than they are today.”
Will Hale, chief executive of equity release advisers Key, said: “While the challenges around home ownership for the younger generations are deep-rooted, the later life lending industry can be part of the solution.
“The relevance of products such as lifetime mortgages is clear. Attitudes to debt are changing and with products now available that offer low rates alongside flexible features and important customer protections, we need to ensure that older people and their families understand all their options and are able to access specialist advice to ensure the right outcomes for their individual circumstances.”
Claire Singleton, chief executive of Legal & General Home Finance, said she was “unsurprised” that borrowers are generally more comfortable to carry mortgage debt into their sixties and seventies. “We know that the increasingly flexible range of products, such as optional payment lifetime mortgages, where customers can opt to pay the interest on their loan, are helping to make later life borrowing a good choice for many customers.
“For some homeowners, their property is now their most significant asset. Half of homeowners across England and Wales could unlock an average of £72,988 from their homes – above the average pension pot of £61,930. With the right advice, later life lending can help people make the best use of their property wealth.”