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Money blog: ‘My anxiety levels are skyrocketing’ – the mortgage bottleneck facing elderly Brits | UK News
‘My anxiety levels are skyrocketing’ – the mortgage bottleneck facing elderly Brits
Per Katya Williamsmoney team
Many of us view retirement as a peaceful end to several decades of hard work.
But a growing number of mortgage holders are facing the need to freeze their relaxation as they have no choice but to work beyond retirement age to pay off long-term mortgages.
Homeowners are still reeling from painful interest rate rises by the Bank of England (BoE), which raised high street mortgage rates to 6.8%. Those who took out or renewed their mortgages last year have likely seen their monthly payments skyrocket.
A recent report from the BoE revealed that almost half of all mortgages issued in the last three months of 2023 were for 30 years or more, while two in five were issued to borrowers who would have already passed state pension age at the end of the term. of the mortgage.
Different figures from UK Finance show that 41,580 first-time buyers took out mortgages with terms of 30 years or more in the last quarter of 2023, of which around 15,700 (38%) were over 35 years old.
‘I’ll pay until I’m 75’
A single Hove homeowner, who asked that her name not be used, said that although she had a “healthy deposit” for the flat she bought a year and a half ago, the mortgage was still a “huge stretch” and she will pay until she is 75. .
“I can’t get it down, I need to keep working,” she said.
“When I’m older, I’ll have no other guaranteed source of income other than my company pension and state pension. They won’t cover my mortgage and other expenses.”
Stephen Eblet’s mortgage is set to last until he is 68 – one year after retirement age. He says he has enough in his private pension to pay for it, but it will impact his finances in retirement.
The 62-year-old self-employed plumber, who lives in Gristhorpe, near Scarborough, suffers from musculoskeletal pain and is worried about “getting to the finish line” at 67, a retirement age he says is “too high” for manual workers .
“My anxiety levels are skyrocketing,” he said. “I’m terribly worried about having to finish work early because of back problems and where that will leave me with a mortgage and how that will affect my lifestyle if I have to retire.”
Inheritance, reduction and falling interest rates – how Brits are planning to reduce their mortgages
Taking out a long-term mortgage doesn’t necessarily mean you’re stuck.
There is the option of reducing the term at the end of the fixed rate period or moving to a cheaper home to cut some of the debt.
This is the case for Danielle Steele, 39, from Swindon, who has a mortgage with her husband that will currently end when they are 71.
They plan to downsize once their two daughters leave home in about a decade, which means they’re not too worried at this point.
Father-of-four David Clarkson, 41, who lives in Flintshire, said he and his wife recently opted for a mortgage that will take them until they are 75, with a fixed rate for three years. He kept his payments within £150 of the amount they paid before.
He expects interest rates to fall over the next three to six years to allow them to pay on time.
“So far we haven’t had to change many aspects of daily life, but this will change in the coming years if wages don’t rise or prices continue to rise,” he said.
Steve, 51, from Scotland, said his mortgage is three years past his retirement age – but it is a “calculated risk”.
“We hope to receive an inheritance to pay off our mortgage sooner. Not that you want older relatives to die, but it seems like a lot of people have to rely on that these days,” he said.
Long term means high interest
Gerard Boon, managing director of online mortgage broker Boon Brokers, says staff have seen an increase in the number of customers reporting that they will have to work more later in life to pay their bills.
“We always ask how long people are willing to work. Five or six years ago or even before COVID… people would typically say retirement age [is] 66 or 67 years old and that was quite normal. But now most of the time people say [they’ll] I have to work until I’m 70 or maybe 75,” he said.
He noted that some lenders have “accepted” this fact and, as a result, are raising the age limit on their mortgages. Others remain more cautious, like Halifax, which recently lowered the maximum age limit from 75 to 70 for some of its products.
Boon said his advice to clients is to always opt for a shorter term if possible, as they will pay “a lot more” interest over the course of a long-term deal – but for many this is simply not viable.
“I would say the vast majority of applications, especially for first-time buyers in the 20 to 25 age range, opted for the longer time period,” he said.
“People are trying to reduce their costs… I think a lot of people are taking these longer mortgage terms in hopes that they can refinance later to shorten the term.
What are lenders’ rules regarding retirement age?
UK lenders will have age limits on mortgage loans – one is a limit on the maximum age at which you can take them out and another on repaying them.
Different creditors will have different rules about the age at which they require the debt to be repaid.
The upper age limit for paying a mortgage typically ranges between 70 and 85, while most won’t allow you to close a new deal after age 80.
Individual circumstances such as income, employment status and credit history will also affect eligibility, as they would for any borrower.