Homeowners will be ‘repaying mortgage into retirement’

The average age of a first time buyer in the UK is 36, according to research carried out by MoneySupermarket.

That means those lucky enough to get on the housing ladder in their mid-30s would be 61 before they had paid off their mortgage if they opted for a 25-year repayment plan. However, figures released by the Council of Mortgage Lenders suggest that an increasing number of people are opting for longer-term deals.

Nearly one-third of homeowners are choosing loans that last longer than 25 years, opting instead for 30, 35 and in some cases even 40-year terms.

It is unsurprising then to learn that 50 per cent of 25-34 year-olds expect to still be paying off their mortgage once they are retired.

That is according to research from the Building Society Association (BSA). Worryingly, the survey also showed that 27 per cent of people in that age bracket are concerned they will have issues with securing a loan once they hit retirement. They believe their income (or lack thereof), credit history and age may all hamper their chances of securing a deal.

Head of mortgage policy at the BSA Paul Broadhead said: "As the average age of a first-time buyers increases, borrowing into retirement is becoming the 'new normal', rather than a niche form of lending."

The Mortgage Market Review that the government introduced just over 12 months ago means that lenders are now more rigorous in their approach to agreeing loans. Strict affordability assessments can leave some borrowers with issues when it comes to securing a mortgage.

Mr Broadhead suggested the government, regulators and the financial services sector all need to adapt t0 the fact that borrowers are getting onto the property ladder later on in life. 

They need to be flexible, and he hints, be more like the building society sector, which operates a longer-term approach that looks at each case on an individual basis.