45% of mortgaged homeowners under the age of 40 made it not the property ladder “much later” than they expected, compared with 29% of over-40s, according to new research by the Equity Release Council.
The trade body’s study of 5,000 UK adults’ financial experiences also shows 43% of mortgaged homeowners under the age of 40 relied on financial help from family or friends to buy their first home. In comparison, just 23% of those aged 40+ relied on similar support to get onto the property ladder.
32% of homeowners with a mortgage are unsure if they will become ‘mortgage free’ before they retire or have already ruled it out, while 20% feel the idea of retiring ‘mortgage free’ is unrealistic.
Instead, the Council’s research highlights attitudes to secured debt in retirement are changing, as nearly one in four mortgaged homeowners (24%) say they don’t mind if they are still paying off their loan in later life. 47% believe their generation’s attitude to debt in later life is more accepting than their parents’, with those aged 25-34 most likely to feel this way (52%).
The findings show the majority (70%) of mortgaged homeowners feel comfortable with their current level of mortgage debt, rising to 75% of those aged 50+. Many also feel taking out a mortgage in later life can benefit them: 32% see it as a way to provide money to improve their lifestyles, while 31% see it as a way to access funds to help out family members.
One in three mortgaged homeowners (33%) feel financial services providers are getting better at offering mortgages to people in retirement. However, the need for clear information is apparent as 36% say they are confused about what mortgages are available to people in later life. The Council’s research suggests confusion is highest among the under-40s (42%).
Jim Boyd, CEO of the Equity Release Council, said: “The realities of delayed homeownership are prompting people to reassess their attitudes to secured debt in later life. There are clear signs that paying a mortgage in retirement is no longer a taboo: for many people it can make the difference between financial hardship and enjoying a more comfortable lifestyle while also supporting family members.
The ability to use property wealth to improve your retirement experience is a choice many homeowners have earned through years of paying a mortgage and building an asset. Lifetime and retirement mortgages allow people to make the most of property as a source of wealth as well as a home. Our findings suggest later life lending products are likely to be even more important for future generations of retired homeowners than they are today
“It’s vital we continue to break down the remaining misconceptions about people’s choices in retirement and improve awareness of the options available. The consumer protections involved when exploring equity release are designed so people can make educated and informed decisions, which means considering all potential alternatives and often leads to a different course of action entirely.”
Stephen Lowe, group communications director at Just Group, added: “People need to stockpile money while working to use in later life but with many not paying enough into their pensions it is likely the value of property is going to play a bigger role in generating retirement cash.
“The (median) amount of wealth in active or preserved pensions for people aged 55-64 was just over £91,000 according to official figures up to 2018 which suggests income from private pension wealth will be relatively modest.
“However, with an average property price of around £250,000 currently and about three-quarters of retirees owning their own homes, there is scope to see the home as a financial ‘power pack’ in later life. That may be to provide income or lump sums, to pay for care, or to give gifts to children as an estate-planning measure while still being alive to see the benefits.
“Competition and innovation in the equity release market is providing new opportunities for people to draw on that property wealth in efficient ways. For example, where people have sufficient income but perhaps want to make gifts to children then interest-serviced options are a way to release the lump sums they need now while controlling the rate at which the outstanding loan grows and potentially saving Inheritance Tax later.”
