Trend Towards Long-term Mortgages Could Hit Retirement Income

Trend Towards Long-term Mortgages Could Hit Retirement Income

Trend Towards Long-term Mortgages Could Hit Retirement Income

A recent freedom of information request to the Bank of England has revealed a worrying increase in the number of homeowners who will still be repaying their mortgages in retirement. Even though homeowners will have a significant asset on their hands once their mortgage has been repaid, very few today would have been planning to use retirement funds for their final mortgage payments.


How big a problem is this?

The information was requested by former pensions minister Steve Webb, who now works as a pensions industry consultant. The data provided by the Bank of England shows that in the final quarter of 2021, 31% of new mortgages had a final payment date beyond the state pension age of the holder. Fast-forward two years, and the figure now stands at 42%, with concerns it could rise even further in the short to medium term. However, there is an alarming gap between the age groups.

Over the two years in question, the number of homeowners set to continue mortgage payments into retirement increased by:-


  • More than 100% for under 30s
  • 30% for those under 40


When looking at those over 40, there was a general decline in the number of mortgages extending into retirement.


How many mortgages are affected?

In practical terms, the number of new mortgages impacted over the two-year period equates to approaching 300,000. The figure is likely to be even higher today when you consider that despite hopes of interest rate reductions, we have not seen any movement in UK base rates. To put this into context, as of December 2023, 13 million mortgages were outstanding in the UK, equating to a total debt of £1.66 trillion.

Hopefully, when interest rates eventually come down (together with lower inflation), this should reduce the pressure on household budgets and the need to extend mortgage durations. Historically, the average UK mortgage has been around 25 years, but it has been creeping closer to 30 years recently, with some homeowners now looking towards 40-year mortgages.


What are the options if you are struggling with mortgage repayments?

Aside from the growing trend towards extended mortgages into retirement, many people are still suffering the consequences of the cost-of-living crisis. While inflation may have fallen from 11% to just over 3%, we have seen no movement in interest rates yet, and taxation as a percentage of GDP is at its highest level since the 1940s. 

If you are struggling to cover your regular mortgage payments, it’s essential to address the issue sooner rather than later. There are several options, which include:-


  • Request a payment holiday
  • Switch to short-term interest-only repayments
  • Remortgage on a longer duration


Most UK mortgage providers signed up to the Mortgage Charter, which obliges them to help those struggling with payments. This is a voluntary arrangement, although if the major UK mortgage providers had not signed up, we would likely have seen formal regulations introduced.



Most homeowners would have planned to pay off their mortgage before retirement, reducing pressure on their finances and providing a useful asset for the future. Unfortunately, due to a raft of economic challenges over the last decade, household budgets have been under pressure, and many are struggling with the traditional 25-year mortgage. Consequently, we have seen many homeowners switching to 30-year and 40-year mortgages, which, for some people, will take them into retirement.

While those approaching retirement and still paying off their mortgage will likely have equity in their home, an extended mortgage period could eat into retirement income. Please call us if you would like us to revisit your retirement plans and ensure you have sufficient income in later years.