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Paying a mortgage off as fast before retiring seems like a reasonable financial goal, but for one in six households this will not be the case.
Research by financial services firm Hargreaves Lansdown found that on average people expect to repay their mortgage by 57. However it also revealed that one in six homeowners will be over 65 by the time they pay off their mortgage, or may never clear the loan.
This comes as a result off higher property prices and the trend for buying a home later in life, giving homeowners less time for paying a mortgage off before retirement.
When asked, 16 per cent of adults say they’ll be over 65 by the time the mortgage is finally paid off, this includes 5 per cent who didn’t believe they’d ever be mortgage-free.
The study found 16 to 34-year-olds to be more optimistic about when they can expect to be paying a mortgage off than older generations. 80 per cent of those with a mortgage in this age bracket believed they would be able to pay it off by the time they turn 65.
This youthful confidence might come from the fact that they have managed to buy a home relatively early in life. On the other hand, it could simply be optimism.
Sadly, the latter is more likely the case after research from the Financial Conduct Authority in 2017 forecast that 40 per cent of first-time buyers would still be repaying their home loans aged 65.
‘While the previous generation might be footloose and mortgage-free by their 50s, increasingly, we’re saddled with debts as we head into retirement,’ Sarah Coles, personal finance analyst at Hargreaves Landsdown, told the Daily Mail.
‘Higher property prices and more people in higher education mean we’re buying later and borrowing more for longer,’ she adds.
‘For some people, this is all part of a sensible long-term plan. They won’t reach state pension age until their late 60s, so they already plan to work past 65, and will still be able to afford their mortgage payments.
‘Even if they choose to retire earlier, they may find it perfectly manageable if they have generous pensions and can access low-interest rates on their small remaining mortgages,’ explains Sarah Coles.
However, she points out that some homeowners will end up as ‘victims of circumstance.’ They won’t be able to repay their mortgage by the time they retire and can’t work later in life or pay their mortgage from their pension.
‘These people could end up as one of the one in five who say they’ll never be able to repay,’ she says.
Are you on track to pay off your mortgage before you turn 65?