“[Mortgage] Loans lasting up to 40 years can leave buyers unable to save for pension, say regulators”

“First-time buyers are taking out jumbo loans on longer terms that will leave four in 10 borrowers paying off their mortgage well into retirement, regulators have warned.

The Financial Conduct Authority (FCA) found that 40% of borrowers who took out a mortgage in 2017 will be aged over 65 when their mortgage matures – leaving them unable to save for a pension, and vulnerable to any financial shocks.

The 40% figure represents a huge change over the last five years. As recently as 2012, just 22% of mortgages were expected to run into the borrower’s retirement. But that number has nearly doubled as buyers stretch themselves to pay for escalating house prices.

Historically, buyers have taken out 25-year mortgages to pay for their home, and in 2007 the 25-year term was still the most common deal. But the FCA found that 30-year terms have now become the norm, with 34% of loans taken out in 2017 lasting 30 years or more.

Most lenders now allow mortgages of 35 years, while Halifax and Nationwide, the two biggest lenders, will offer loans with 40-year repayment terms.

Many first-time buyers are also delaying a purchase until they are in their 30s as they save to afford the deposit.

In a grim assessment of the financial health of UK households, the FCA warned that the burden of a mortgage throughout people’s working lives is likely to limit their ability to save for a pension and deal with financial shocks. …”