Home owners with mortgages realise it will take longer to pay of their loan

Almost a third of current mortgage holders in Britain, equating to four million people, may have to re-evaluate their finances in later life as their estimated repayment age will be older than they expected.

In contrast the younger generation is full of optimism, with the majority of 18 to 34 year old borrowers stating they believe they will have paid off their mortgage by the time they’re 51, according to new research.

The study from online mortgage broker L&C Mortgages highlights that as people get older, they become more realistic about when they will pay off their mortgage.

The average 18 to 34 year old believes they will be mortgage free by 51, 35 to 54 year olds think it will be paid off by 58, while those 55 and over on average think they will be borrowing into retirement age, paying it off by 68.

A group of older borrowers are indeed resigned to a lifetime of debt according to the research, with 8% of those over 55 stating they don’t think they’ll ever be mortgage free.

The report raises some interesting gender differences around borrowing in later life, fining that 32% of woman said financially supporting a family is the main reason they expect to pay off their mortgage later than planned, while 24% of men gave the same response.

Of those who say that they may still be paying off their mortgage after 65, some 65% of women asked said they don’t have a plan, compared to 50% of male respondents. While 37% of men said they don’t think it matters what age you have a mortgage at, compared to 19% of women, which would suggest men have a more relaxed attitude to borrowing in later life, but are more likely to have formulated a plan.

‘What is becoming increasingly clear is the market has changed, people are facing up to the fact that they are going to have their mortgage for longer. It’s great to see such an optimistic younger generation who think they will be debt free by the age of 51, however the reality for many older borrowers is that they will be paying off their mortgage into retirement and beyond, which is clearly a shock,’ said David Hollingworth from L&C.

‘The optimism displayed by the younger generation is admirable but perhaps misplaced, and not realistic as our research shows that raising a family, among other commitments, can get in the way further down the line,’ he explained.

He believes that people have to acknowledge they may be carrying this debt for longer than anticipated and plan accordingly. ‘While some borrowers might be relaxed about borrowing later in life now, the debt isn’t going to magically disappear, and mortgage misery may become a reality down the line if they see a dip in income post retirement,’ he explained.

The research also found that 58% of respondents had fixed rate deals, however 31% currently sit on a Standard Variable Rate (SVR) and 46% of those who own their house outright said their last mortgage was on an SVR, suggesting borrowers could pay off their mortgage even earlier if they took time to find a better deal.

‘It’s encouraging to see a large group of borrowers actively managing their mortgage and sitting on fixed rate deals. While there may be specific circumstances where sitting on an SVR makes sense, for the most part this group of people could be getting a head start for later life by shopping around and saving themselves a small fortune. Given people are worried about how they might afford re-payments as they get older, proactively taking action now could be the difference between paying off your mortgage before you retire or not,’ Hollingworth concluded.

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