Pension warning as homeowners left to pay mortgage payments into retirement

As interest rates continue to have a crippling effect on mortgage rates, homeowners are warned that their golden years could be impacted with high repayments each month of over £1,000.

As fixed-rate mortgage deals hover around six percent, many people are opting for a longer mortgage term of 40 years, or an extended lease period just to keep costs low.

The impact of this however is having to pay off one’s mortgage deep into their retirement using their state pension and other investments and savings.

This could mean people will either have to keep working to afford their repayments or see large chunks of their pension swallowed up by their ongoing direct debits to clear the balance. 

Rising mortgage rates have meant that 41 percent of live mortgages in the UK are held by customers who will be beyond retirement age (66+) at maturity, according to Equifax.


Over a quarter of these are held by those who will be over 70 at maturity.  

Of the identified group of UK mortgage borrowers whose loans will not mature until they are past 66, 40 percent of them are already aged 55 or over and have a remaining mortgage balance over £100,000. 

Further, nearly half as many borrowers are 55+ and have contractual monthly repayments over £1,000. 

The full new State Pension is £203.85 per week. This wouldn’t even cover someone’s monthly mortgage payments if they were around £1,000.

Rising interest rates, paired with other inflationary pressures, have created an unsustainable situation for many mortgage borrowers of all ages. 

With UK interest rates climbing to a 15-year high of 5.25 percent, average monthly mortgage repayments have seen a 15 percent year-on-year increase.

The number of mortgages with monthly repayments over £1,000 has also seen a 28 percent year-on-year increase.  

Meanwhile, older customers who are already close to retiring may find themselves unable to get further extensions from lenders, and instead face increased monthly repayments alongside other heightened expenses like food and utilities.

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According to the Office for National Statistics, the average pension pot currently stands at £107,300 – well short of what’s needed for a comfortable retirement.

There have been reports that 22 percent of pensioners have reduced or stopped spending on medicine and a further five percent have skipped meals, according to research by Age UK.

The prospect of high outstanding mortgage repayments will only be a further burden.  

While several large lenders in the UK have started cutting mortgage rates in recent weeks due to intensified home loan market competition, borrowers continue to face very high costs. People of different ages are faced with varying options to manage this.  

Some may be forced to consider turning to equity release as a way to free up cash from their home without selling it.

Figures from data commissioned by the Equity Release Council show a 23 percent increase in people already doing this to get their hands on extra money or maybe downsizing.

Britons are encouraged to peak to a financial advisor before making any decisions.

Paul Heywood, Chief Data and Analytics Officer at Equifax UK said: “Despite inflationary pressures slowing down and early signs of rate cuts among lenders, the high-interest rate environment means there are still tough times ahead for mortgage borrowers.  Faced with higher monthly repayments, many borrowers are extending their loan terms for years into the future, hoping to spread out costs to ease the financial burden.

“However, this is not available to all customers equally. Customers nearing retirement age are one of the toughest-hit groups, with many set to still be repaying their mortgages well beyond retirement age.

“Some members of this older demographic are unable to extend their terms further, meaning they are faced with more expensive monthly repayments.

“Customers facing this dilemma should reach out to lenders to explore what options are available to them, which may include potentially downsizing to remove a significant financial outlay.”

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