A large proportion of over-55s are making major cutbacks in a bid to be mortgage free by retirement, as the cost of living crisis continues to impact people’s finances, says Key Later Life Finance.
A survey by the equity release adviser found 57% of over-55s are making sacrifices in the run up to their retirement in order to make sure they do not have to make mortgage repayments when they’re no longer working.
Around a third (31%) of this cohort are cutting back on general spending, leisure and entertainment, while 14% are reducing their pension contributions to help clear their mortgage.
Nearly a fifth (18%) said they will only be mortgage free by the time they retire because they have pushed their retirement age back.
The findings follow research by the Financial Conduct Authority which showed that between 2018 and 2022 there was a 29% increase in the number of people taking their first step on the property ladder in their 50s. Meanwhile, UK Finance Figures found that the percentage of mainstream mortgages extending beyond expected retirement ages has grown to more than 60% compared with around 20% two decades ago.
Key said that among those who do not expect to clear their mortgages, around 70% expect to still be paying off their loans for two or more years while 13% expect to be mortgage-free within 12 months of retirement. The main driver behind people’s inability to enter retirement mortgage-free is the cost of living crisis, said Key, while 30% have suffered pay cuts.
Just over one in 10 (11%) plan to use later life lending solutions such as specialist mortgages, equity release and retirement interest-only mortgages.
Chris Bibby, managing director at Key, said: “Paying mortgages into retirement is clearly a growing issue with increasing numbers of homeowners expecting to still be making monthly repayments after they stop work.
“That might sound worrying but potentially a bigger worry is the sacrifices that people are making to ensure they are mortgage-free by the time retire. That is very concerning and highlights the need for later life lending solutions.”
Bibby added: “There are more flexible ways to manage money in the run-up to retirement and to achieve a better balance. Over-55s should seek specialist advice on the growing number of options available which could help them to have the retirement they want.”
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