More than a million mortgages have been issued in the past three years which home-buyers are set to still be repaying into pension age. The latest data shows that two in five new mortgages have terms that see homeowners still making payments in retirement. Ultra-long, or extended, mortgages have become more popular during a time of higher interest rates as people aim to spread the cost. But this will ultimately make the loan more expensive, and experts say it raises serious questions over financial planning for retirement. At the end of 2021, about three in 10 mortgages took repayments into pension age, according to Bank of England figures obtained by the pension consultancy LCP. That proportion grew as interest rates rose. Despite interest rates having fallen from their peak, LCP said the trend appeared to have continued. “There is increasing evidence that taking out a mortgage which runs past pension age is an entrenched feature of the mortgage market rather than a temporary blip,” said Steve Webb, a former pensions minister who is now a partner at LCP. “This has profound implications for retirement planning, as it is likely to mean that savers may end up using already inadequate pension pots to clear a mortgage balance.” The temptation for young homeowners is obvious. A longer mortgage term would reduce monthly repayments. But with the average age of first-time buyers rising – it now stands at nearly 34 – the question of how people will be able to afford mortgage payments when they hope to retire becomes increasingly important.
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