Over 65s’ mortgage debt set to double over next 13 years
Borrowing into older age will move into the mainstream within the next decade, said the Building Societies Association (BSA), as the amount of mortgage debt held by over 65s is set to double by 2030 (from £20.1bn to £39.9bn).
It said that current economic trends such as house price inflation, tighter credit conditions and low real wage growth mean we can expect to see a significant shift in the customer base of the mortgage market over the next 13 years.
As many first-time buyers are delayed from stepping onto the property ladder by factors including low supply of new homes and higher house prices, the home ownership life cycle has shifted, including the time of life by which mortgages are paid off is shifting too.
Over 6%, or 1.42 million people aged 35 to 64, will not have paid off their mortgage before retirement given the current term of their loan.
Buy later, repay later
It will become more common for consumers to buy for the first time in their late 30s or 40s, with longer mortgage terms from the outset. This means they will be more likely to trade up later in life and repay at least part of the mortgage from retirement income or draw more to fund needs in later life.
Paul Broadhead, head of mortgage policy at the BSA, said: “The socio-economic changes lenders and consumers are already experiencing are unstoppable. So the focus must be on adapting to a changing market. Top priority must be given to radically increasing housing supply across all tenures, including recognising shared ownership as a tenure in its own right.
“We must also respond as an industry to reflect the changing needs of customers. This will include an increasingly intergenerational approach to home ownership, as parents and grandparents borrow to release some of their housing wealth to support the younger generation. It is the combination of multiple factors that will drive greater levels of mortgage borrowing in later life.”