A new report from Halifax has found that delays in getting on to the property ladder could force many people to work beyond their expected retirement date to pay off their mortgages.
The latest edition of the bank’s ongoing Generation Rent study has found that a third of young people think they will still have an outstanding home loan when they reach retirement age, while 44% are concerned they won’t be able to meet repayments after they stop work. Half of the under-45s questioned said their housing costs currently meant they were struggling to save for old age.
Craig McKinlay, mortgages director at Halifax, said: “Despite the barriers and the understandable concerns, it’s very positive to see that younger generations are still striving to get onto the housing ladder, with more than 300,000 taking that first step in 2015.
“This recovery has been fuelled by a number of factors, including an abundance of successful Government initiatives and the affordability of monthly mortgage repayments due to the continuing low interest rate environment and some very competitive deals.
“Although many of those late to the ladder will inevitably still be paying their mortgages later into life, they are increasingly taking a range of measures to ease the burden.”
McKinlay added that while many young people tried to extend the terms of their mortgages beyond the standard 25 years in order to make repayments more manageable, this tactic could have its dangers.
“A longer term will reduce monthly payments, but as homeowners build up equity they should look to reduce this term or make overpayments to ensure that the dream of owning their own home doesn’t turn into an unnecessary nightmare in later years,” he said.
“A £50 monthly overpayment to a mortgage of £140,000 spread over 25 years will reduce the term by two-and-a-half years and save more than £7,500.”
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