Spike in borrowers in their 30s taking ultra long mortgages which they will be paying into retirement

A growing number of homeowners will be making mortgage payments in their seventies, a trend revealed through an analysis of data from the Financial Conduct Authority.

A Freedom of Information inquiry made by wealth manager Quilter highlighted a substantial increase in individuals securing mortgages lasting 35 years or more.

Between January and September 2024, over 22,100, people aged 36 or older took out mortgages with a repayment period of 35 years or more.

Since 2019, there has been a staggering increase of 156 per cent in the number of individuals aged over 36 who have been taking out longer loan terms, as highlighted by an analysis by Quilter.

The mortgage repayment period is the number of years someone commits to paying off their mortgage for. Typically, 25 years was the standard repayment term in the past, but it has become increasingly common for homebuyers to choose a longer term, sometimes 30 years or more.

This lets them pay less every month, but it means they end up paying more in total due to the interest building up over a longer period.

Individuals who secure a mortgage that is set to last 35 years or more and take it out at 36 or older will be at least 71 when it is fully repaid, provided they do not make any overpayments to shorten the term.

Aided by already elevated house prices, there's a driving force behind the rise in longer mortgage terms.

The average house costs 6.55 times as much as the average annual income, based on data from Halifax, a major mortgage lender. This price-to-income ratio is much higher in certain parts of the country, reaching as high as 17.5 in some areas.

House prices have fallen in recent years due to wage growth outpacing them, but higher interest rates haven't made mortgages any more affordable.

Most borrowers today are securing mortgage rates averaging 4-5.5 per cent, a significant increase from the rates of 1-2 per cent that were being secured three years ago.

Karen Noye, Quilter's mortgage expert, comments that "The significant surge in UK mortgage sales to those over 36 years old opting for a 35 year repayment period underscores pressing concerns about housing affordability, the impact of increasing interest rates, and evolving socio-economic patterns."

The ongoing growth in house prices has made it increasingly challenging for homebuyers, especially those purchasing later in life, to afford homes without extending the mortgage repayment period significantly.

'At the same time, higher interest rates have increased monthly payments, causing many borrowers to extend their mortgages to 35 years in an attempt to lower these costs.'

There is a particular concern regarding the financial implications of having a longer mortgage term.

Extending the term of your mortgage can result in repaying tens or even hundreds of thousands of pounds extra.

A person with a £200,000 mortgage bearing interest at a rate of 5% annually would be required to make monthly repayments of approximately £1,320. Upon completion of a 20-year term, the total amount paid would amount to £316,876.

For a borrower with a £200,000 mortgage and a fixed interest rate, spreading repayments over 40 years would see monthly payments of £965. In total, they'd pay £463,136 by the time the mortgage is paid off, which is £146,260 more than if they had chosen a 20-year term.

It is likely that their interest rate would be subject to change, either if they obtained a better rate through a remortgage or were moved to their lender's standard variable rate.

This feature enables you to see the impact of different loan terms on your mortgage repayments.

The danger of owing money on a mortgage into old age.
If you own a home, you may still have a mortgage to pay when you retire. This is because you've spent so long making mortgage payments, and perhaps you've only paid down a small amount of what you owe overall. Additionally, because interest rates may be low as you're near retirement, new loans or credit may be more attractive, such as:
1. Second steppers
2. Retirement interest-only Mortgages

There's a possibility that continuing to make mortgage payments into one's seventies could have a detrimental impact on the quality of life during retirement.

Individuals committing to a mortgage with a term that will end in their seventies must be certain they can afford to meet all repayments until the very end - which potentially requires continuing to work beyond their originally planned retirement age.

The state pension age will shortly be 67, and it is anticipated that this age will continue to rise as life expectancy continues to increase.

The full state pension for the 2025/26 tax year is £221.20 per week, or roughly £11,582.40 per annum, which translates to approximately £960 per month or £2,322 per quarter.

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It's unlikely that just the state pension will be enough to cover a mortgage payment, combined with normal living expenses, resulting in many people relying on their savings or other sources of income.

'The implications of this trend will have a lasting impact, particularly as more individuals are approaching retirement with outstanding mortgage responsibilities,' Noye says.

Pensioners living on a fixed income often struggle to cover the cost of their mortgage payments, and potentially other household expenses, unless they had planned for this eventuality in their retirement strategy.

Additionally, longer mortgage periods result in significantly greater interest payments throughout the loan's duration.

This could damage their capacity to save for retirement and meet other long-term financial objectives.

**What you need to know about reducing your mortgage term**
Are you considering cutting down your mortgage term so you can pay off your home loan sooner? Be aware that an accelerated mortgage is only possible if you have an interest-only or a flexible mortgage. However, you will typically be charged penalties for breaking the terms of your fixed-rate deal.
**Advantages of reducing your mortgage term:**
1. You pay less interest overall.
2. You have the security of owning your home more quickly.
3. You save money in interest payments.
**Disadvantages of reducing your mortgage term:**
1. You will have larger monthly repayments.
2. You may face penalties or charges for an early settlement.
3. You must be certain you can afford your increased outgoings.
You may want to consider speaking to a financial adviser about any concerns or questions you have about paying off your mortgage early.

The benefit of opting for a long mortgage term is that you can then reduce it later, should your financial situation improve.

Borrowers might be able to shorten the length of their mortgage when they re-mortgage, if they're now earning more and can afford to make larger repayments, or if they've received an inheritance which they can use to pay off part of the outstanding mortgage balance.

Home loan holders can also make hire-purchase or spot overpayments to repay the loan balance, provided they are within agreed limits.

Most mortgage lenders allow overpayments of up to 10% of the total mortgage balance annually without imposing an early repayment penalty. Some are more accommodating than others, while some have stricter terms.

Lowering the balance on the mortgage prior to retirement can make mortgage payments more manageable and financially stable in old age.

Noye adds: 'When contemplating a mortgage commitment of 35 years or more, it is advisable to seek expert financial guidance when feasible.

'A financial planner can help you choose the right mortgage that suits your situation, taking a comprehensive look at your finances so you have the freedom to make extra payments if you want to.'

'Simultaneously, it can aid in arranging for a pleasant retirement with the funds necessary to cover mortgage payments.'

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