A fifth of current mortgage holders believe they will still be paying off their mortgage beyond the age of 65 – equating to approximately three million people, fresh research from L&C Mortgages has revealed.

What’s more, almost six in ten (58%) of those who don’t expect to be mortgage-free by the time they reach state retirement age do not have a plan for how they will pay off the money they owe.

Mortgage misery in retirement

Given the lack of planning, 26% of respondents said that having a mortgage after 65 makes them feel nervous. Of those who don’t expect to be mortgage-free by retirement and do not have a plan to pay it off, 53% are currently over the age of 55.

This aligns with reports that a growing number of pensioners are living in poverty and highlights the importance of dealing with a mortgage earlier in life.

The research paints a worrying picture for those who will still be borrowing in later life, as 19% of respondents are concerned about how they will afford payments as they enter retirement age.

In fact, one in ten (8%) of those over 55 don’t think they will ever be mortgage free, a sign of the changing market, and people facing the reality of having a mortgage for longer.

Working on a way to pay

L&C found a large number of people are being forced to continue working past retirement age in order to pay off their mortgage. Some 27% of those who had already paid off their mortgage after 65 said they had to continue working in order to do so.

Moreover, of those who think they will still be paying off their mortgage after age 65, 32% believe they will have to continue working in order to afford the payments.

When asked why people think they will pay off their mortgage later than originally planned, the cost of financially supporting a family came out top, with over a quarter (28%) of people putting their family first.

“The fact that people increasingly have to work beyond their standard retirement age to pay off their mortgage is a concern,” said David Hollingworth from L&C. “Many will see a dip in income post-retirement which could pose affordability issues for older borrowers.”

“Although homeowners will, and should, continue to aspire to pay off their mortgage before retirement, the reality for many could mean having a mortgage for longer.”

He said that with many of us taking the first step onto the ladder later in life and high house prices, a bigger mortgage adds to the likelihood of carrying mortgage debt into later life.

With this, it’s clear that homeowners will shift their priorities depending on family needs. However, there still needs to be a clear focus on the repayment of the mortgage, to avoid reaching a point that could force the sale of the family home, Hollingworth said.

He advised people to assess their options and use the time before retirement to make a plan. Older borrowers have more choice than ever, though, as the industry continues to innovate and cater for an ageing population.

“Lenders have become increasingly flexible in their approach to older borrowers and the Retirement Interest Only mortgage market is one that is only likely to see more growth,” he added. “Anyone feeling anxious about their options shouldn’t panic and should seek expert advice.”

Interest only ignorance

The study also shed light on interest only/part-interest only mortgages. Those who are not able to repay the capital at the end of the mortgage will need to extend their borrowing or risk losing their homes.

Almost two fifths (37%) of those on an interest only/part-interest only mortgage said that they don’t think they will be able to pay the remaining sum once their term ends – or indicated that they are unsure how they will go about it.

Additionally, of those who own their property outright having held an interest only/part-interest only mortgage previously, nearly half (46%) revealed that they relied on endowment policies to pay off the remaining capital at the end of their period, with 35% using savings and/or investments.

“Repayment of an interest only mortgage that once seemed a million miles away may now be looking large for those that haven’t set capital aside. That may force the need to refinance and extent the mortgage term,” Hollingworth continued.

“Mortgage options for those that can demonstrate ongoing affordability are going in number so it makes sense to seek advice sooner rather than later. Rather than suffering in silence, speak to someone who can help you explore the market and find a solution that works for you.”