Still paying back your mortgage when aged over 65 may be nothing new, but it is certainly on the increase. It is estimated that approximately 40% of mortgage holders will still be making mortgage payments after the age of 65, this figures compares to around 25% in 2006 (1).
There are numerous reasons why less people are paying back their mortgage by the age of 65; most importantly is the disparity between wage and house price increases (2). This has pushed the age that at which people make their first purchase and then subsequently move up the property ladder back a number of years as well as meaning larger mortgages are required. The result is a real battle for borrowers to pay back mortgages before retirement (1).
Lenders are now seeing demand for mortgages that stretch into borrowers’ 70s, 80s and even 90s and deals are becoming increasingly available to meet this need (3). However late in life property purchases are not the only cause of mortgaged pensioners. There is also evidence of people taking out mortgages to alleviate financial difficulties as well as wanting to help children with major expenses (1). There could of course also be wealth pensioners borrowing as a way of protecting their estates from inheritance tax.
David Hollingworth from the mortgage broker London & Country summed up the situation of borrowers as “some but not all of these borrowers are in a difficult spot.” (1)
“There are some people who, for example, are reaching the end of an existing mortgage but do not have the wherewithal to repay the capital without selling up and moving. That’s a more ‘distressed’ situation. But there is another group of people who have ample income and who simply want to continue borrowing at low rates because they have better uses for their capital.” (1)
An option that is increasingly popular for those struggling to repay might be to transfer it into an interest-only lifetime mortgage (3). This form of equity release doesn’t typically require monthly payments; instead the interest, generally a fixed rate, rolls up and is compounded. This interest along with the original mortgage will be repaid when the borrower sells their home or dies. Borrowers with adequate income could opt to pay the interest to keep down the eventual bill.
For those with sufficient income who want to extend their mortgage, cheaper options may be available in the form of conventional mortgages with older lending limits (4). A growing number of mainstream lenders are prepared to push up the age limits. These include Nationwide who lend to age 85 and Halifax to 90 (1).
Your home may be repossessed if you do not keep up repayments on your mortgage.