Later life mortgage lending affecting retirement planning

4 June 2024

Later life mortgage lending data showed a decline over the past quarter, but continues to cast a “significant shadow” over retirement planning, according to Hargreaves Lansdown.

The number of new loans issued to borrowers aged over 55 dropped 11.7% year-on-year to 28,840 in the first quarter of this year, data from UK Finance shows.

The value of lending also decreased 8.5% year-on-year to £4.3 billion.

The data showed a  total of £2.26 billion of this lending was given to borrowers aged between 55 and 60, down 9.2% on the previous year. Meanwhile, £440 million of new lending was to borrowers aged over 70.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Later life mortgage lending is falling but still casts a significant shadow over our retirement planning. Having to find the money to pay housing costs in retirement can put further pressure on a budget that may already be under severe strain.”

The most recent data from Hargreaves Lansdown’s Savings and Resilience Barometer shows only 39% of households are on track for a moderate retirement income as defined by the Pensions and Lifetime Savings Association. This puts a single person’s living costs at just over £31,000 per year and a couple’s at £43,100 but this doesn’t include rental or mortgage costs.

Morrissey said: “Lifetime mortgages accounted for £410 million of new lending over the period. It shows equity release is still playing a real part in people’s retirement plans though we don’t know whether this is being done to fund things like home renovations or people are using it to boost their income. The overwhelming volume of new lending comes from residential lending. Of course some retirees will repay their mortgages relatively quickly post-retirement but these figures show over £440 million comes from borrowers aged over the age of 70.”

She warned that the problem is likely to mushroom because those getting on to the property ladder in their 30s are taking even longer mortgages and they may face difficult retirement spending choices in an effort to make ends meet.

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