Forget retirement: one in seven will still be paying a mortgage at 70

Rising house prices, longer mortgage terms and a delayed step onto the property ladder means 14% of homeowners will still be paying off our mortgages when we are 70

It used to be that we could look forward to our retirement years safe in the knowledge that we would be financially secure, our mortgages would be paid off and we would be free to stop working.

But new research by pensions and investment company Aegon shows that for many of us this dream is slipping away.

According to the findings, 14% of respondents – one in seven – said they will still be paying off their mortgage aged 70. A combination of delayed house purchases, rising house prices and longer mortgage terms mean that many homeowners will still be lumbered with mortgages at a time when they supposed they would be retiring.

Steven Cameron, Pensions Director at Aegon, said: “Paying off your mortgage in time for your 70th birthday is now far from a given. Inflated property prices mean those getting onto the property ladder are doing so at later ages and are borrowing more for longer.

“Those 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.”

Cameron says that the solution to this problem could lie in the new interest-only retirement mortgages, the first wave of which we should see next year following a relaxation of rules.

The new mortgages will take into account that homeowners over the age of 65 may still be deemed a safe bet for remortgages even if they are not working, providing that they have enough equity in their existing property to fund downsizing when the need arises or a reasonable amount of savings.

Customers would be able to just pay off the interest on their mortgages until they either die or go into full-time care – at which point the property would be sold to pay off the outstanding amount.

Lifetime renters

In addition, Aegon’s survey also revealed that 42.5% of current tenants don’t believe they will own their own home at 70, a belief that is supported with data from the Department for Work and Pensions (DWP). The DWP's Family Resources Survey shows a decline in people of working age (across all age brackets) who are actually homeowners. If this trend continues, many people will reach retirement age with no property to their name, meaning they will still have to factor in rent payments every month to their budget.

Cameron said: “Our survey suggests that we will see an increase in the number of lifetime renters in the future. As younger generations increasingly fail to get onto the property ladder, renting a home becomes the long-term plan and for many the only realistic option.

“But the impact rent payments will have on your retirement plans needs to be carefully considered. Renting while working is a very different situation to renting when retired. People need to consider how feasible it is to rent when they are no longer earning a salary. It would be dangerous to assume the state will continue to provide the same level of housing benefits to future retirees as they currently pay.”

Cameron says that in order to cover the extra costs of possible rent or mortgage costs into retirement age, people need to start saving more into their pensions now or risk working longer.