‘Serious questions’ for lenders over surge in ultra-long mortgages
Young homebuyers are being forced to gamble with their retirement prospects by taking on ultra-long mortgages, according to a former pensions minister.
Sir Steve Webb described data – supplied by the Financial Conduct Authority to the Bank of England – as “shocking”.
It suggests that more than one million new mortgages have been issued over the past three years with end dates beyond the state pension age.
The ex-Liberal Democrat MP, who is now a partner at the consultancy firm LCP, voiced fears that borrowers could be forced to raid their pension savings to clear their mortgage in a worst-case scenario.
Sir Steve saw the potential for harm in any case, as longer-term mortgages deprive people of a period running up to retirement when they could be mortgage-free and boosting their pension.
According to the Freedom of Information data requested, 42% of new mortgages in the fourth quarter of 2023 – or 91,394 – had terms going beyond the state pension age.
The figure stood at 38% in the same period a year earlier.
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In the final quarter of last year, people aged 30 to 39 accounted for 30,943 new mortgages lasting beyond state pension age, while people aged 40 to 49 accounted for 32,305.
Under-30s made up 3,676 of these mortgages.
People aged 50 to 59 accounted for 18,854, and there were 661 who were over 70.
Mortgage rates have been rising since the end of 2021 when the Bank of England began action to tackle rising inflation.
Taking home loans with longer maturity dates tends to be more attractive when interest rates are high, as monthly repayments are lower.
Sir Steve Webb was pensions minister in the coalition government
Sir Steve said: “The huge number of mortgages which run past state pension age is shocking.
“The challenge of getting on the housing ladder is forcing large numbers of young homebuyers to gamble with their retirement prospects by taking on ultra-long mortgages.
“We already know that millions of people are not saving enough for their retirement and if some of that limited retirement saving has to be used to clear a mortgage balance at retirement they will be at even greater risk of poverty in old age.
“Serious questions need to be asked of mortgage lenders as to whether this lending is really in the borrower’s best interests.”
The FCA’s responsible lending rules require lenders to take account of future changes to income and expenditure, such as the borrower retiring, where this was expected to happen during the mortgage term.
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Emily Shepperd, the FCA’s chief operating officer, admitted in a speech to the Building Societies Association last week that lending into retirement was moving “from a niche to a norm”.
“Alongside longer terms we also see a greater proportion of mortgages projected to mature around state retirement age,” she said.
“The projected median age of a first-time buyer at maturity is now 65 years old, up from 56 in 2005.
“The proportion of mortgage customers over 67 is currently less than 2% of all loans. By 2040 this rises to 5%, and by 2050 it is almost 10%.”
She said that building societies recognise the need to consider different income and expenditure sources and needs, different lifestyle risks and different capacity to weather financial shocks, adding: “With borrowers projected to hold debt for longer, now is the time to ask yourself about the products and services you will provide to those borrowers to meet their needs responsibly and help them meet their financial goals – what will you need to do to support this growing population of customers and deliver good outcomes?
“Getting this right will of course benefit those individual customers, enabling them to meet their housing needs in later life, and move if that is their aim.
“It may also support first-time buyers with an increase in the supply of homes.”
Karina Hutchins, principal for mortgage policy at lenders’ body UK Finance, said: “The proportion of longer-term mortgages has been increasing in recent years as buyers to look for ways to stretch their affordability.
“When reviewing new mortgage applications, lenders will act within the responsible lending rules set by the Financial Conduct Authority and carefully consider whether the borrower will be able to afford their mortgage in the future.
“This will include whether the requested term would take the borrower beyond their anticipated retirement age.
“Where this is the case, it is common practice for lenders to request proof of pension. Those closer to retirement, usually within 10 years, may need to satisfy their lender that they can afford the mortgage based on their retirement income.
“Whilst longer mortgage terms can offer lower initial monthly repayments, the borrower will pay more in interest and have less disposable income to put into their pension if the mortgage runs for its full term.
“We would encourage customers to speak to an independent mortgage adviser to discuss the best options available for their specific circumstances,” she concluded.
A workman saved a seven-year-old boy from a burning car in the aftermath of a deadly crash caused by a suicidal ex-pilot, an inquest has heard.
The schoolboy’s rescue came following the collision on the M6, which killed former RAF man Richard Woods and four others, in October last year.
Last week a coroner ruled that Woods, 40, took his own life by deliberately driving his Skoda the wrong way down the motorway while drunk and hitting a Toyota Yaris head-on.
The driver of the Toyota, Jaroslaw Rossa, 42, was also killed, along with his two sons, Filip, 15, and Dominic, seven, and his partner Jade McEnroe, 33.
Cockermouth Coroner’s Court heard on Thursday that Ms McEnroe’s son was also in the car but survived after workman Gavin Walsh came to his rescue at the scene, which was near Tebay services in Cumbria.
In a statement to the inquest, Mr Walsh said he was a passenger in a transit van travelling to Scotland when he witnessed the crash.
He jumped out of the vehicle and used a jack to smash the rear windscreen of the Toyota and pulled the boy out of the burning vehicle.
Mr Walsh said: “We really did try, I can assure everyone we did our best. We only had minimal time.
“I saved a life that day and I hope never to witness anything like that again.”
He added that he has never stopped thinking about the boy, and said: “I hope we will meet again one day and I will give you a massive hug.”
At the time, the family were returning to Glasgow from a trip to Legoland in Windsor, Berkshire.
The inquest heard that Wood, who was travelling at a speed of at least 65mph, would have been charged with manslaughter had he survived.
Recording conclusions of unlawful killing, Cumbria assistant coroner Margaret Taylor said: “I found that Jaroslaw, Jade, Filip and Dominic died as a consequence of the unlawful acts of another driver.”
The inquest heard how Mr Woods, from Cambridgeshire, had served a distinguished 14-year career in the RAF and was a flight instructor for BAE Systems at the time of his death.
Jade McEnroe. Pic: Cumbria Constabulary
Dominic and Filip. Pic: Cumbria Constabulary
In Ms Taylor’s record of inquest, Mr Woods was said to have been experiencing “a number of stressors in his life” and had a “history of harmful use of alcohol”.
Following the crash, he was found to be nearly four times over the legal drink-drive limit and a two-thirds empty bottle of gin was found in his car.
On the day of his death, concerns had been raised over his behaviour at a work conference near Preston in Lancashire.
Mr Woods failed to return to his seat after lunch and was later spotted driving erratically and swerving across three northbound carriageway lanes on the M6.
After pulling onto the hard shoulder, he then proceeded to U-turn and drove southward on lane three.
Filip, Dominic and Jaroslaw Rossa. Pic: Cumbria Constabulary
Detective Sergeant Deborah Story, from Cumbria Police, told the inquest that Mr Woods would have been prosecuted on four counts of manslaughter had he lived.
She said hypothetical charges of murder were considered by detectives but not thought appropriate because of a lack of information that Mr Woods knew the family or anything that provided a link between them.
Ms McEnroe’s parents, Marie McEnroe and George McNellis, told the coroner they thought it was “murder”.
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A statement from the mother of Filip and Dominic, and the ex-wife of Mr Rossa, Kamila, was read out at the inquest.
She said Mr Rossa, known as Jarek, was born in Poland where they became a couple and went on to have three boys.
He loved playing computer games and had “lots of friends”, she said, and worked at the Wagamama restaurant in Silverburn, Glasgow.
She said she was “devastated” over the deaths, adding: “Our lives will never be the same.
“I am heartbroken at the passing of my beloved angels Filip and Dominic.”
Marie McEnroe said her daughter, a spa therapist, had been in a relationship with Mr Rossa for about two-and-a-half years.
She said Jade had been a “brilliant mother” to her only child, was “really happy” with Mr Rossa and it was “lovely chaos” when all the boys were playing together.
Ms McEnroe added: “Life changed forever that day”.
Ms Taylor praised the “selfless acts of bravery” from those in the aftermath of the collision, including Mr Walsh, who she said went towards the burning car “without hesitation for his own safety”.
The coroner added: “Without his swift response, Jade’s child would also have perished.”
Addressing the bereaved family members, she said: “Your loss is unimaginable but you have conducted yourself with dignity and I thank you for that. I wish you strength for the future.”
Anyone feeling emotionally distressed or suicidal can call Samaritans for help on 116 123 or email jo@samaritans.org in the UK. In the US, call the Samaritans branch in your area or 1 (800) 273-TALK.
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