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A third of mortgage holders don’t think they will pay off their mortgage by age 65

  • 28% of homeowners surveyed would consider a lifetime mortgage
  • A quarter of those surveyed found fixed early repayment charges reassuring when considering taking out equity release

Research from investment, protection and retirement specialist LV= reveals that growing numbers are expecting to be making mortgage repayments after the age of 65.

The LV= Wealth and Wellbeing Research Programme* - a long-term quarterly survey of 4,000 UK adults – highlights attitudes towards mortgages and retirement. It reveals that:

  • 32% of mortgage holders don’t think they will pay off their mortgage by age 65
  • One in ten retirees still had mortgage debt when they retired
  • The average mortgage debt outstanding at retirement was £38,000
  • 63% of those who retired with an outstanding mortgage debt had to pay the mortgage debt with their pension

In recent months, mortgage costs have soared due to rising rates affecting people in different stages of life. Those in retirement would likely benefit the most from being mortgage-free if inflation continues to rise, due to living on a fixed income.

People are more likely to turn to equity release as inflation continues to rise
As equity release has become mainstream, consumers are much more considered about how they could use Equity Release products to better suit their needs and lifestyle in later life. Unlike traditional mortgages, borrowers can choose to manage the interest on their equity release loan through early repayments despite higher rates at outset. Equity release customers also benefit from security of tenure, meaning that the homeowner can stay in the property until they die or go into long-term care. LV= research shows that:

  • 28% of homeowners would consider a lifetime mortgage, 3% said that they already have a lifetime mortgage
  • 31% of those who would consider a lifetime mortgage said that they would be more likely to because of the current economic conditions. This increased to 45% for those with a household income of £100,000 or more
  • The features of equity release that those surveyed found reassuring were downsize protection (33%), the ability to transfer the lifetime mortgage to another property if you moved home (32%), the lifetime mortgage being provided by a well-known financial services brand (29%) and fixed early repayment charges (25%)

Borrowers can repay up to 10% of their lifetime mortgage early without incurring early repayment charges (ERCs). Almost a quarter (24%) of people said that they would find this feature reassuring. LV= Lifetime Mortgage Lump Sum and Drawdown+ customers are able to make unlimited repayments each mortgage year, totalling up to 10% of the total amount of loan advances (excluding additional borrowing) at the date of the repayment without being subject to an early repayment charge. 

“The LV= Wealth and Wellbeing Research Programme highlights how the dream of a mortgage–free retirement could be over for millions of people. High inflation, combined with longer mortgage terms means that more people will be forced to continue paying mortgages during retirement. This could result in less discretionary income for pensioners to spend on the more enjoyable things they had in mind for their retirement.

“Our latest quarterly survey shows that 300,000 mortgage holders have fallen behind on payments in the past three months. Many people are on fixed-term mortgages ending in the next 12 months. That means millions of people face even higher mortgage payments when they come to re-mortgage or switch to a variable rate.

“Retirees are also faced with difficult choices. For example, they may turn to drawing down money from their pension at a higher rate that may be unsustainable for them in the long run and increase the risk of running out of money. One option is to use equity release to unlock the value from their home to potentially pay down mortgage debt.  

"Our research reveals that those considering equity release are increasingly pragmatic about the option of accessing equity from their home as a way to help them achieve a more confident later lifestyle. It is very encouraging to see how the flexibility offered by today’s modern equity release products is welcomed. 

"The role of advisers in supporting their clients through making these choices is incredibly valuable, especially with equity release, in helping customers decide with confidence what is right for them and addressing the worries they may have.” 

David StevensDirector of Savings and Retirement

Notes to Editors

*LV= surveyed 4,000 nationally representative UK adults via an online omnibus conducted by Opinium in March 2023
UK population stats from ONS. Total UK adult population is 52.9m UK adults (aged 18+).