Two in five new mortgages have lending terms which will run past pension age, data collected by LCP shows.
This compares with just three in 10 new marathon mortgages issued by lenders at the end of 2021, says the consultancy after reviewing the latest Bank of England home loan figures for the second quarter of this year.
Just over 40% of new loans issued in the second quarter had longer terms, typically of 30 years or over, that would take the mortgage holder into retirement.
Over a million new mortgages have been issued since the end of 2021 with terms running past pension age, the consultancy estimates.
It adds that over the last two years, the growth in marathon mortgages seems to have happened “primarily at younger ages”, with a 30% increase in the absolute number of under-forties taking out mortgages set to run into retirement.
The firm explains that one reason for ultra-long home loans may be affordability, “with younger borrowers opting for extended terms in response to high interest rates”.
But it points out that, despite mortgage rates “now seeming to be on a downward trajectory”, the proportion of new mortgages with these long durations remains at around two in five.
LCP partner Steve Webb, who was pensions minister for five years from 2010, says: “There is increasing evidence that taking out a mortgage which runs past pension age is an entrenched feature of the mortgage market rather than a temporary blip.
“This has profound implications for retirement planning, as it is likely to mean that savers may end up using up already inadequate pension pots to clear a mortgage balance.
“Anyone involved in helping today’s workers plan for their retirement must now factor in the possibility that housing costs will run into retirement or will have to be funded from already meagre pension pots”.
