Delays in getting on to the property ladder could see young people still paying off their mortgage well into their 60s, a new report has highlighted.
A third of people aged 18 to 45 expect to be paying off their mortgages beyond age 60, according to the 2016 Generation Rent report from Halifax.
This is causing anxiety, with 44% of those surveyed worrying that they won’t be able to afford their mortgage payments in retirement.
One in two is worried that paying their mortgage will hamper their ability to save for retirement.
On a positive note, the report reveals that young people still aspire to buy their own home. It says that the number of first-time buyers has recovered strongly in recent years, with 300,000 buying their first home in 2015. The typical age of a first-time buyer is now 30.4 years – nine months older than in 2010.
Almost half of those surveyed see buying a property jointly with a partner as the most likely way to improve affordability. More than a third (34%) said that extending a mortgage beyond 25 years was the second most effective way of affording a property.
Craig McKinlay, mortgages director at Halifax, said: “Despite the barriers and the understandable concerns, it’s very positive to see that younger generations are still striving to get onto the housing ladder, with more than 300,000 taking that first step in 2015.
“This recovery has been fuelled by a number of factors, including an abundance of successful government initiatives and the affordability of monthly mortgage repayments due to the continuing low interest rate environment and some very competitive deals.
“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.”
Raising a deposit
The report highlights the problems first-time buyers face raising a deposit, with rising property prices exacerbating the problem. It says the average price of a first property is now £196,801, up from £134,889 in 2010.
However, this has not deterred potential first-time buyers, with 31% saying that house prices won’t impact on their plans for homeownership – though they accept that it will take longer to raise a deposit. Would-be first-time buyers says they would be prepared to save for around five and a half years for a deposit, up from 5.35 years in 2015.
35-year mortgages more common
In 2015, 26% of first-time buyers had a 35-year mortgage. This compares to just 16% in 2007. And it seems that this is a trend that is likely to grow: one in three young people believes they won’t pay off their mortgage until after their 60th birthday, while 6% think they won’t be mortgage-free over the age of 70. Almost one in 10 (8%) expect to be paying their mortgage their whole life.
Mr McKinlay adds: “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.”