Most people still aim to have paid off their mortgage by the time they retire, and a majority of todays 60-somethings have achieved this goal. However, according to new research, mortgage or rent payments could still be hanging over two thirds of todays 40-somethings after they reach retirement. Soaring house prices, increased levels of re-mortgaging, longer loans lasting up to 40 years, and the trend towards buying a first property later in life mean many people will now be shouldering housing costs well into retirement or may be forced to work longer to make ends meet.
More than half of all over-40s expect to be in this situation after they stop working, with 31 per cent anticipating they will be burdened with a mortgage and 20 per cent saying they will live in rented accommodation. But those aged between 40 and 50 are more pessimistic, with two thirds of them seeing housing payments stretch into retirement. Twenty six per cent expect to have a mortgage and 42 per cent to still rent their home in retirement, according to research by retirement income specialist Partnership.
Even those now aged 66-70, who are generally retired already or on the brink of it, remain concerned about housing costs. Those renting a property make up 18 per cent of this group, and those with mortgages some 15 per cent. For such people, housing costs will take a big portion out of retirement income, which currently averages £13,000 a year, according to HMRC.
Partnership says that mortgage payments now average £514 a month, which would work out at 47 per cent of income, while rental costs average £399 a month, or 37 per cent of income. Other household running costs mount up too, with average council tax currently at £115 a month, average utility bills at £109 a month and average property maintenance costing £66 a month.
Figures from the Council of Mortgage Lenders have revealed that nearly one in three first-time buyers now borrow for longer than 25 years - representing an increase of a third during the past four years. Extending a mortgage term makes monthly payments more affordable but people end up repaying more in the longer term. Meanwhile, many people are still on interest only mortgage deals, meaning they could face a financial shock if they haven't got the money to repay the capital at the end of the term, which generally occurs when they are around 65. Many people in that situation face the prospect of having to sell their home or else try to extend the period of their mortgage agreement well into old age. This means that increasing numbers will no longer be able to have the property-owning retirements now enjoyed by their parents.
Please note: This article is intended as guidance only and does not constitute advice, financial or otherwise. No responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by Latimer Hinks.
Martin Williamson is Head of Residential Property at Latimer Hinks Solicitors in Darlington. Latimer Hinks has a team of around 40 people serving private and corporate clients. For further information: www.latimerhinks.co.uk or call 01325 341500.