A third of people surveyed by Halifax expect to work beyond retirement age to pay off their mortgage.
The lender commissioned Populus to interview 8,110 18 to 45-year-olds between the end of February and the start of March, finding 44 per cent were worried they will not be able to afford their mortgage payments in retirement and 51 per cent were concerned paying their mortgage will hamper their ability to save for retirement.
Despite this, the report revealed home ownership aspirations remain as strong as ever and those late to the ladder are taking a range of measures to ease the financial burden.
The numbers of first-time buyers has recovered in recent years, with 300,000 taking the first steps onto the property ladder in 2015.
The average age of a first-time buyer is now 30.4 years – nine months older than in 2010.
In 2007 the proportion of first-time buyers taking up a 35-year mortgage stood at 16 per cent, but by 2015 this figure had grown to 26 per cent.
Over the same period, the share of mortgages with a 20 to 25-year term dropped from 48 to 30 per cent.
Less than half of all respondents (46 per cent) believe they will be mortgage-free before they retire, falling to just 30 per cent of non-homeowners.
Craig McKinlay, mortgages director at Halifax, pointed out borrowers should be cautious when looking to extend their mortgage beyond 25 years.
“This will not only increase the overall cost of the mortgage, but could have a potential knock on impact on their quality of life in retirement.
“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 gave the example of a £50 monthly overpayment to a mortgage of £140,000 spread over 25 years reducing the term by two and a half years and saving more than £7,500 - based on an interest rate of 3.39 per cent and loan-to-value of 85 to 90 per cent.
Robert Cochran, pensions development manager at Scottish Widows, added their research suggested 45 per cent of people in their 30s and 40s are prioritising spending now over saving for later life.
Mr Cochran said: “Yet with younger generations expecting to be paying mortgages into retirement, it is more important now than ever that people push retirement saving up their financial agenda and get a better understanding of how pounds in a pension pot translate into income in retirement to avoid facing a financial time bomb at the stage when they want to stop working.”
peter.walker@ft.com
