MoneyWeek story- mortgages in retirement

For many years borrowers of all ages have been taking extended mortgage terms up to age 70 or 75 on the basis of getting the borrowing needed and keeping the repayments affordable. When discussing they often talk about plans to overpay, continue working to that age or reducing the term on future remortgages when their incomes have increased. What we are starting to see is those well intentioned plans rarely come to fruition and this means more and more borrowers still struggling to cover a mortgage payment on a reduced retirement income, forcing many to end up selling their home or downsizing. We are only now seeing the tip of this particular iceburg.

For the Golden Agers out there, still having the noose of a mortgage, can seriously eat into a pensioners retirment income, limiting the ability to afford essential expenses - this can cause stress and anxiety, negatively impacting ones overall well-being. Its essential to prioritize paying off your mortgage before retirement, and consider making overpayments where you can, or/and contribute as much as possible to your pension plans to ensure a comfortable retirment income. Most of all seek professional guidance to develop a personal strategy for managing mortgage debt in retirement.

We recently assisted a lady in her 70s who still needed to work to continue paying her mortgage and eventually had to consider later life options as work became more challenging. We are seeing more pensioners in this situation and the number of pensioners falling into this will increase to well above the half million today as borrowers in their late 50's & 60's stretch out their mortgage terms to make payments affordable. We discuss the impact of retirement if their term extends past their planned retirement as they do need to consider what happens strategies like overpaying or using lump sum pension pots don't always go the way they expected.

With the number of pensioners paying for mortgage debt continuing to rise and that number set to rise further with a further influx of those borrowers who’s interest only terms are ending, rapid evolution in the later life sector is in dire need. The current offering of traditional, retirement interest only and lifetime mortgages is still not where it needs to be. A bridge between a RIO and a lifetime product needs to be built to allow for mandatory payments allowing a higher loan to value. I have lost count of the number of enquiries for those with loan to values around 60-65% which simply cannot be serviced by the industry and are left with the prospect of selling up and usually having to move well out of the area of their families and social network.