One in seven UK homeowners believe they will still be paying a mortgage aged 70, according to survey results released today (9 July).
Research by Aegon showed 14 per cent of people thought they would still be paying a mortgage aged 70 and 42.5 per cent of people currently renting their home thought they would still be doing so at the same age.
The pension and investment company attributed the expectation to still be paying a mortgage in retirement years to a combination of stepping onto the housing ladder later in life, higher house prices and the option to borrow for longer.
Steven Cameron, pension director at Aegon, thinks borrowers paying off a mortgage before their 70th birthday is now far from a given.
He said: "Borrowers left with an outstanding mortgage on their property face the prospect of either budgeting mortgage payments into their retirement or alternatively continuing to work.
“We know that one in four people expect to still be working at 70 but not everyone will be fit enough or want to do so. That’s why it’s good to see the development of new solutions for older borrowers, such as retirement interest-only mortgages.
“As our population ages, we need to look creatively at how to join up employment, pension and housing policies.”
Jonathan Harris, director at Anderson Harris, said people still having a mortgage aged 70 was inevitable as life expectancy rises, the population is working later in life and staying in their properties longer.
He said: “Whilst the value of properties has increased and older borrowers may therefore be asset rich, they may not be in the position to pay off the remaining loan.
“However, mortgage lenders generally will want the loan repaid at the end of the initial agreed term - this can be restrictive on borrowers who are no longer earning an income to qualify on affordability tests for an extension.
“Going forward, the market needs to adopt a flexible and pragmatic approach in terms of how they accommodate older clients.”
The Financial Conduct Authority (FCA) has recognised the problem around maturing interest-only mortgages and changed its rules around the products earlier this year, now treating these loans as standard mortgages rather than under equity release standards.
Unlike equity release, residential mortgages don’t require people to seek advice before they can opt for these deals.
The Aegon survey interviewed 700 adults aged 18 to 64-years-old.