Mortgage debt for the over-65s set to double by 2030

New research has revealed that mortgage debt for the over-65s is set to double by over £19 billion in the next 13 years.

A new study by the International Longevity Centre-UK (ILC-UK), supported by the Building Societies Association, has revealed that the amount of mortgage debt held by over-65s is set to increase from £20.1 billion to £39.9 billion by 2030.

Building societies are also seeing a rise in mortgages for older customers, with the proportion of new mortgages from the sector with a term beyond 65 rising from 34% to 38% during 2016.

Home ownership is changing in response to economic, demographic and housing market trends, making borrowing into older age more common.

The report reveals that current economic trends such as house price inflation, tighter credit conditions and low real wage growth mean we can expect to see a significant shift in the customer base of the mortgage market over the next 13 years.

The mortgage market is witnessing a marked evolution from the traditional route of individuals buying their first homes in their 20s, trading up in their 30s and 40s, paying off debt in their 50s and 60s and then entering older age with little or no mortgage debt.

Since the financial crisis, home ownership amongst 20 to 29 year-olds has fallen from 53% to 38%. For those between 30 to 39 years-old, home ownership has fallen from 73% to 65%.

Many first-time buyers are delayed from stepping onto the property ladder by factors including low supply of new homes and higher house prices, greater student debt, persistent low real income growth and challenges in saving for a deposit.

As the home ownership life cycle shifts, the time of life by which mortgages are paid off is shifting too, the ILC-UK research has shown that over 6% – or 1.42 million people – aged 35 to 64 will not have paid off their mortgage before retirement given the current term of their loan.

If nothing changes, it will become more common for consumers to buy for the first time in their late 30s or 40s, with longer mortgage terms from the outset.  They will be more likely to trade up later in life and repay at least part of the mortgage from retirement income or draw more to fund needs in later life.  By 2030, the ILC-UK projects that £3.3 trillion or 58% of all housing wealth in the UK will be owned by the over 65s.

Paul Broadhead, head of mortgage policy at the BSA, said: “The first question for national policy-makers, including government, is whether action should be taken to try and maintain the ‘traditional’ market.  In my view the socio-economic changes lenders and consumers are already experiencing are unstoppable.  So instead the focus must be on adapting to a changing market. Top priority must be given to radically increasing housing supply across all tenures, including recognising shared ownership as a tenure in its own right.

“We must also respond as an industry to reflect the changing needs of customers.  This will include an increasingly intergenerational approach to home ownership, as parents and grandparents borrow to release some of their housing wealth to support the younger generation. It is the combination of multiple factors that will drive greater levels of mortgage borrowing in later life.”

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