Mortgage payments continue into retirement for 400,000 people

Over 400,000 people expect to retire owing money on their mortgage, as trends for buying later in life and remortgaging take their toll.

Figures from The Equity Release Council, the trade body for equity release companies, show over the next 30 years over 403,908 people will retire with an average of £52,446 still outstanding on their mortgage.

Although some people enter retirement with debt due to unforeseen circumstances, such as underperforming endowment policies or windfalls that fail to materialise, many are simply unable to pay off their mortgage in time.

Just under a quarter, 23%, of people aged 55 to 64 say they will retire owing an average of £65,955 and 17% of 45 to 54-year-olds believe they will still owe £48,037.

The number of people who said they would retire with mortgage debt increases the nearer they get to retirement. Just 16% of 35 to 44-year-olds think they will still have a mortgage to pay in retirement.

Mortgage debt is not the only problem retirees face, credit card debt is also prevalent. A total of 26% of 55 to 64-year-olds expect to have credit card debt in retirement averaging £2,453, 20% of people in the 45 to 54 age bracket think they will owe money on cards when they retire, on average £7,842.

Of people aged 35 to 44, 22% think they will have credit card debt when they retire, and the average debt will be £2,100.

Andrea Rozario, director general of The Equity Release Council, said 73% of people plan to use equity in their home to restore their financial health in retirement but they will still struggle with such large debts.

‘Many people find that due to unforeseen circumstances they enter retirement with a small amount of debt but the fact that over 400,000 people expect to still be repaying their mortgage when they retire is shocking,’ she said.

‘This suggests that the trend towards people buying homes later in life and remortgaging on a regular basis is having an impact on the type of retirement that people can expect to enjoy. With 73% of people intenting to use housing equity as part of their later life finances, many are sure to use it to solve the problem of repaying a mortgage or other debt in retirement.

‘Downsizing might be the answer for those with more valuable homes but many 55 to 64s will struggle to repay over £65,000 worth of borrowing and still buy another property.’

Stephen Lowe, group external affairs and customer insight director at Just Retirement, said it found in its research that 25% of people have no plans for how to repay the debt and the same amount expect to repay the mortgage with their retirement income.