More borrowers will be paying off mortgage debt into their 70s
A growing number of borrowers will still be paying off mortgages into their 70s, according to new data, raising concerns about the possible financial dangers of longer-term lending.
In the first nine months of 2024, 22,103 mortgages with a term of at least 35 years were approved to people aged over 36.
This figure is higher than any previous full year since 2018, the timeframe of the data, and points to the growing popularity of longer-term mortgages.
The data was obtained from the Financial Conduct Authority (FCA) through a freedom of information request and was analysed by Quilter, a City wealth manager.
It shows that since 2019, there has been a 156 per cent increase in the number of borrowers aged over 36 taking out longer loan terms.
According to the Bank of England, the share of all borrowers taking out new mortgages with terms of 30 years or more has increased from 12 per cent at the end of 2005 to 50 per cent in 2024.
Karen Noye, mortgage expert at Quilter, said the increase was driven by ever higher house prices as well as concerns about elevated borrowing costs.
“The data paints a striking picture of how financial pressures are reshaping homeownership,” she said.
“The continued rise in property prices has made it increasingly difficult for buyers, particularly those entering the market later in life, to afford homes without significantly extending the repayment term.”
Taking out longer term loans means borrowers can spread their repayments out, which lowers the cost of monthly repayments. But, officials at the Bank are nervous about the possible systemic impact.
Longer-terms can push monthly repayments past the state retirement age, when borrowers might have less financial flexibility.
By extending terms, borrowers also take on more debt in total, while a larger share of their repayment will go towards paying interest rather than the loan principle.
Noye noted that retirees may find it “challenging to manage mortgage payments”. She also warned that higher costs for homeownership could “erode their ability to save for retirement”.
Still, recent research from the Bank suggested that the risk to financial stability from longer-term mortgages was “relatively small” due to stringent checks on lending into retirement.
An FCA spokesperson said: “Lender’s products should be designed to meet the needs and objectives of their customers, both now and in the future. They must assess that their customers can afford to repay their mortgage, taking into account likely future changes to income and expenditure.”