More individuals in their 50s and 60s are aspiring to own their first homes. Legal & General Mortgage Services reports a notable 13% increase in prospective homeowners aged 56 to 65 in the first quarter of 2024, compared to the same timeframe in the previous year. This increase is part of a broader trend observed on the Legal & General’s Ignite platform, a tool utilised by brokers to find mortgage products.
Interestingly, the overall landscape of first-time buyers in the UK reveals that they represent 38% of potential buyers from April 2023 to April 2024, with an average age of 33. Over the past year, these buyers have been searching for loans averaging £217,125. The duration of these mortgages typically ranges between 31 and 35 years, although terms from 26 to 40 years are also common.
Economic Factors Influencing Homeownership
Kevin Roberts, the managing director of Legal & General Mortgage Services, emphasises the sustained desire to own a home, despite some buyers taking longer to reach this milestone. Roberts suggests that improved affordability and potential decreases in inflation and the Bank of England’s base rate could further invigorate the market for first-time buyers. Additionally, factors like high rental costs and lower mortgage rates at the beginning of the year have prompted many to consider purchasing homes now rather than later.
Concerns Over Retirement and Long-Term Financial Planning
The trend towards longer mortgage terms, while making monthly payments more manageable against the backdrop of high property prices and mortgage rates, raises concerns about the long-term financial implications for homeowners. Sir Steve Webb, a former pensions minister and current partner at LCP (Lane Clark & Peacock), highlighted risks associated with mortgages extending beyond the state pension age. Recent data from the Bank of England indicates that 42% of new mortgages in late 2023 had terms surpassing the state retirement age.
Emily Shepperd, Chief Operating Officer at the Financial Conduct Authority (FCA), pointed out that more mortgages are expected to mature around the time buyers reach state retirement age. The median age at mortgage maturity is projected to rise to 65 by 2050, up from 56 in 2005.
Lenders’ Responsibility and Consumer Protection
Amid these trends, UK Finance emphasises the importance of responsible lending. Lenders are increasingly required to ensure that borrowers can manage their mortgage payments into retirement. This often involves verifying the borrowers’ pension income, especially for those nearing retirement within the next decade.