Nearly a third (32%) of current mortgage holders, which equates to approximately 4 million people, may have to re-evaluate their finances as their estimated repayment age will be older than they originally expected.
That is according to research from online mortgage broker L&C Mortgages, which found that in contrast, the majority of 18 to 34-year-old borrowers stated they believe they will have paid off their mortgage by the time they’re 51.
L&C’s study suggests that as people get older, they become more realistic about when they will pay off their mortgage.
The average 18 to 34-year-old believes they will be mortgage-free by 51, while 35 to 54-year-olds think it will be paid off by 58. Meanwhile, those 55 and over on average think they will be borrowing into retirement age, paying it off by 68.
Many older borrowers, are resigned to a lifetime of debt, with almost one in ten (8%) of those over 55 stating they don’t think they’ll ever be mortgage free.
The report also raised interesting gender differences around borrowing in later life. Nearly a third (32%) of women cited financially supporting a family as the main reason they expect to pay off their mortgage later than planned, compared to 24% of men who gave the same response.
What’s more, over a third (37%) of men said they don’t think it matters what age you have a mortgage at, while 19% of women said the same thing. This suggests men have a more relaxed attitude of borrowing in later life but are more likely to formulate a plan, L&C says.
“What is becoming increasingly clear is the market has changed, people are facing up to the fact that they are going to have their mortgage for longer,” David Hollingworth from L&C said.
He said that while it’s great to see such an optimistic younger generation, the reality for many older borrowers is that they will be paying off their mortgage into retirement and beyond.
“The optimism displayed by the younger generation is admirable but perhaps misplaced, and not realistic as our research shows that raising a family, among other commitments, can get in the way further down the line.”
He added: “People have to acknowledge they may be carrying this debt for longer than anticipated and plan accordingly. While some borrowers might be relaxed about borrowing later in life now, the debt isn’t going to magically disappear, and mortgage misery may become a reality down the line if they see a dip in income post retirement.”
Hollingworth states that as the industry continues to innovate and cater for an ageing population, older borrowers have more options at their disposal and anyone feeling worried shouldn’t panic and should seek expert advice.
Sitting on SVR
To no surprise, 58% of respondents were on fixed rate deals. However, nearly a third of customers (31%) currently sit on a Standard Variable Rate (SVR).
Almost half (46%) of those who own their house outright said their last mortgage was on an SVR, suggesting borrowers could pay off their mortgage even earlier if they took the time to find a better deal.
“It’s encouraging to see a large group of borrowers actively managing their mortgage and sitting on fixed rate deals,” Hollingworth continued.
“While there may be specific circumstances where sitting on an SVR makes sense, for the most part this group of people could be getting a head start for later life by shopping around and saving themselves a small fortune.”
He concluded: “Given people are worried about how they might afford re-payments as they get older, proactively taking action now could be the difference between paying off your mortgage before you retire or not.”