ALMOST half of home buyers will still be paying off their mortgage when they retire, the City watchdog warns.
This is a huge increase from previous years, as only 22 per cent of borrowers were expected to pay their mortgage into retirement in 2012, the Financial Conduct Authority (FCA) said.
A whopping 40 per cent of borrowers who took out a mortgage in 2017 will be older than 65 when their mortgage deal ends, leaving them financially vulnerable, the FCA said in its 2019 Sector Views report.
This comes after more home buyers are taking out larger loans over a longer period of time, while many first-time buyers also delay buying own place until they’re in their 30s to save up for a deposit.
Traditionally, buyers have taken out 25-year mortgages to pay for their home, but the FCA found that 30-year terms have now become more common, with 34 per cent of loans taken out in 2017 now lasting 30 years or more.
The burden of a long mortgage deal could limit borrowers’ ability to save for a pension and deal with financial shocks.
“A range of factors, including subdued earnings growth, changing working patterns, increasing household debt and lower saving rates suggest many households may lack financial resilience to withstand financial shocks,” the FCA said.
The watchdog also highlighted that the number of mortgages taken out on high multiplies of the borrower’s income continues to rise.
It said: “Over 25 per cent of mortgages now have an LTI [loan-to-income] of greater than four times income, with an increasing number of loans near the banks’ 4.5 times LTI flow limit.”
How do you find the best mortgage deals?
IF you have or haven't got a deposit lined-up to buy a home, shopping around for a mortgage is the same.
Websites like Moneysupermarket and Moneyfacts have mortgage sections so you can compare costs and all the banks and building societies have their offers available on their sites too.
If you’re getting confused by all the deals on the market, it might be worth you speaking to a mortgage broker, who will help find the best mortgage for you.
A broker will typically cost between £300 and £400 but could help you save thousands over the course of your mortgage.
You’ll also have to decide on if you want a fixed-deal where the interest your charged is the same for the length of the deal or a variable mortgage, where the amount you pay can change depending on the Bank of England Base Rate.
Remember, that you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks, and looking at your credit file.
You may also need to provide documents like utility bills, proof of benefits, your last three month’s payslips, passports and bank statement.
And while you might be tempted to get a mortgage without a deposit, they tend to be more expensive than other deals, so you could be better off saving up instead.
You can check out our guide to the best first-time buyer mortgage deals here.
The Sun spoke with Hannah Maundrell, editor in chief of Money.co.uk, who’s not surprised to hear about the figures.
“With house prices rising at an extortionate rate and wages not keeping up it’s no surprise people are stretching themselves to get onto the property ladder,” she said.
“It’s a catch 22 for many – if you don’t buy and continue to rent what happens when you retire and don’t have a house to live in?
“But at the same time if you buy a home and borrow huge sums to do so you also need to think about what happens when you retire but still have debts to pay.”
Hannah advises prospective home buyers to shop around to get the best deal on everything from your solicitor, surveyor and removals company to your mortgage, house insurance and new furniture.
Meanwhile, Rachel Springall, finance expert at Moneyfacts, said: “First-time buyers may not have much choice but to arrange a mortgage over the more traditional 25 year period because of affordability.
“Whilst taking out a 30 year or even 35 year mortgage will drive down their monthly repayments, they will inevitably be paying out more on their mortgage over the duration of the loan.
“Using up all their readily available savings on a first home can leave consumers open to financial difficulties later down the line, and if the majority of their household income is covering their mortgage and other essentials, that means it will be hard to make provisions for the future.
“Ideally, first-time buyers would be wise to overpay their mortgage to build up more equity and reduce the term of their loan, but they should also keep on top of any credit card debts.”
Most read in money
If you’re worried about applying for a mortgage, here are 10 reasons why you might be rejected and how you can increase your changes.
Meanwhile, a new tool could help you cut your mortgage bills by thousands of pounds per year.
Yesterday, hundreds of thousands of mortgage prisoners were given new hope of getting a cheaper home loan deal.
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News Pictures Huge rise in homeowners who will still be paying off mortgage when they retire
You don’t have to pack away your bikini just because you’re the wrong side of 20. These body-beautiful stars reveal their secrets to staying in shape and prove you can smoulder in a two-piece, whatever your age. Read on and be bikini inspired!
TEENS
Hayden Panettiere
Size: 8
Age: 18
Height: 5ft 1in
Weight: 8st
To achieve her kick-ass figure, Hayden – who plays cheerleader Claire Bennet in Heroes – follows the ‘quartering’ rule. She eats only a quarter of the food on her plate, then waits 20 minutes before deciding whether she needs to eat again.
Hayden says: “I don’t have a model’s body, but I’m not one of those crazy girls who thinks that they’re fat. I’m OK with what I have.”
Nicollette says: “I don’t like diets – I see it, I eat it! I believe in eating healthily with lots of protein, vegetables and carbs to give you energy.”
kim cattrall
Size: 10-12
Age: 52
Height: 5ft 8in
Weight: 9st 4lb
SATC star Kim swears by gym sessions with Russian kettle bells (traditional cast-iron weights) and the South Beach Diet to give her the body she wants. To avoid overeating, Kim has a radical diet trick – squirting lemon juice on her leftovers – so she won’t carry on picking.
Kim says: “I am no super-thin Hollywood actress. I am built for men who like women to look like women.”
https://www.thesun.co.uk/wp-content/uploads/2019/01/NINTCHDBPICT000292839077.jpg?strip=all&w=960
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