Homeownership aspirations causing retirement worries

Its research shows that 34% expect to work beyond retirement age to pay off their mortgage and almost half (44%) are worried that they won’t be able to afford their mortgage payments in retirement.

Over half (51%) are worried that paying their mortgage will hamper their ability to save for retirement.

Despite this, the report reveals that home ownership aspirations remain as strong as ever. The numbers of first-time buyers have recovered strongly in recent years, with 300,000 taking the first steps onto the property ladder in 2015. The average age of a first-time buyer is now 30.4 years – nine months older than in 2010.

In 2007 the proportion of first-time buyers taking up a 35-year mortgage stood at 16%. By 2015 this figure had grown to more than one-in-four (26%).

Raising a deposit has been the consistent barrier for the majority of would-be homeowners. However, the 2016 report tracks the emergence of high property prices being perceived as an increasingly large barrier to purchasing a first home (rising to 60% in 2016 compared to 52% in 2011). The average price of a first property is now £196,801, rising from £134,889 in 2010.

However just under a third of potential first-time buyers (31%) say that house prices won’t impact on their plans for home ownership, with a further 30% agreeing that they will not change their plans to purchase even though they expect prices to continue to rise.

Craig McKinlay, Mortgages Director at Halifax, said:

“Although many of those late to the ladder will inevitably still be paying their mortgages later into life, they are increasingly taking a range of measures to ease the burden.

“Borrowers should be cautious when looking to extend their mortgage beyond 25 years. This will not only increase the overall cost of the mortgage, but could have a potential knock on impact on their quality of life in retirement.

“A longer term will reduce monthly payments, but as homeowners build up equity they should look to reduce this term or make overpayments to ensure that the dream of owning their own home doesn’t turn into an unnecessary nightmare in later years.

“A £50 monthly overpayment to a mortgage of £140,000 spread over 25 years will reduce the term by two and a half years and save more than £7,500."