A generation of homeowners is facing a retirement crisis as tens of thousands end up paying mortgages after retirement.
Data from the Bank of England shows two fifths of home loans issued in the second quarter of last year will be past the retirement age of the owners. It rises from three in ten by the end of 2021.
That risks putting many retirement plans in jeopardy, with older Britons forced to continue working until the debt is paid off.
Former pensions minister Sir Steve Webb, now a member of the LCP, has warned that old age pension debt has become “an entrenched factor in the market”.
LCP, which analyzed the data, estimated that more than 1 million mortgages were issued in the last three years that exceeded the retirement age.
The research found that the majority of homeowners who were likely to have a mortgage in their foreclosure were aged 40-49, and more than 100,000 contracts were taken out in the last three years.
The company said there has been a 30pc increase in the number of under 40s taking out loans aimed at retirement.
Sir Steve Webb said: “There is growing evidence that taking out a pension loan past retirement age is a deep-rooted phenomenon in the mortgage market and not just a temporary blip.
“This has huge implications for retirement planning, as it means savers can end up using previously insufficient pension pots to pay off mortgages.”
Alice Haine, wealth manager at Bestinvest and Evelyn Partners, said the take-up of long-term loans has been on the rise since the period of cheap money ended abruptly in December 2021 when the Bank of England began its fast-track cycle. in an effort to reduce inflation.
Mrs Haine said: “Since then, with borrowing costs accelerating, an increasing number of people have turned to 30-, 35- or even 40-year mortgages.
“Although the loan term is 25 years, long-term loans were increasingly sought after as consumers struggled with problems of being able to pay.”
Helen Morrissey, head of pensions research at Hargreaves Lansdown, warned that house prices are “the hidden horror at the heart of retirement planning,” adding that the pension costs reported by the Pensions and Lifetime Savings Association did not take into account mortgage payments. .
He added: “Not only are we seeing longer mortgage periods, but people will be moving up the housing ladder later and this means they have to account for house prices up to their retirement years.
“Because of the rise in mortgage rates that have increased people’s daily spending, trying to find more money to put into a pension will be another obligation that many people will struggle with.”