Over 50s 'gambling with their retirement' as thousands opt for longer term mortgages that will cost more

Britons over 50 who took out a 21 to 25 year mortgage term climbed by 83 per cent in the first quarter of 2024, when compared with the same period a year earlier new figures show.

On average, in the first quarter of 2024, those aged 50-plus who were looking to re-mortgage owed £217,065.

But data from Legal & General Mortgage Services’ Ignite platform, found the average loan amounts have increased particularly sharply among re-mortgagers aged 51 to 55.

This is an increase of 18.9 per cent from £197,343 in the first quarter of 2023 to £234,716 in the first quarter of 2024.

There has been a general increase in average re-mortgage loan amounts, which Legal and General said reflects the affordability challenges faced by buyers across the sector.

In the first quarter of 2023, the average loan amount searched for by advisers on behalf of all re-mortgage customers was £221,625. This increased to £224,129 in the first quarter of 2024.

Kevin Roberts, managing director, Legal & General Mortgage Services said: “As our data has revealed, there is a significant increase in homeowners aged over 50 looking to re-mortgage on a term that is likely to spill over into their retirement, although how and when people retire looks to be changing.

“In a challenging and dynamic interest rate environment, a large uptick in re-mortgaging requests was perhaps inevitable.

“If interest rates remained low, many homeowners might have stayed put and renewed with their existing lender.”

But he said in a newly competitive market, more people are carefully considering their options “to ensure they can access the best rate possible”.

Roberts said a professional adviser can use their experience and access tools to help borrowers find suitable deals.

Longer term mortgages extending into one's retirement years can significantly impact financial plans for later life.

While perhaps attractive for cheaper monthly payments, carrying a mortgage long-term raises concerns:

• Increased costs through extra repayment years hurt retirement savings and delay retirement.
• Financial risks rise from market ups and downs being amplified by leverage, potentially creating debt problems or difficulties managing investments.
• Variable returns not matching fixed mortgage payments can cause financial stress harming long-term well-being.

Earlier this year, Sir Steve Webb, a former pensions minister who is now a partner at LCP (Lane Clark & Peacock), cautioned that some home buyers could be gambling with their retirement prospects by taking on ultra-long mortgages.

He obtained freedom of information (FOI) data supplied by the Bank of England, showing that 42 per cent of new mortgages in the fourth quarter of 2023 – or 91,394 – had terms going beyond the state pension age.

Emily Shepperd, Financial Conduct Authority (FCA) chief operating officer, previously said in a speech: “Alongside longer terms we also see a greater proportion of mortgages projected to mature around state retirement age. The projected median age of a first-time buyer at maturity is now 65 years old, up from 56 in 2005.

“The proportion of mortgage customers over 67 is currently less than two per cent of all loans. By 2040 this rises to five per cent, and by 2050 it is almost 10 per cent. Lending into retirement is moving from a niche to a norm.”

Leo Smigel, a personal finance expert and the founder ofAnalyzing Alpha said: "Those who are getting close to retirement need to look at their mortgage possibilities.

"Housing expenditures can be brought under control by carefully considering interest-only terms, supplementary payments, or mortgage extensions.

"They can also look into downsizing, refinancing or seeking other assistance to align their housing plans to the rest of their retirement plans."