‘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.
The crash involving a cargo ship and oil tanker off the East Yorkshire coast is bad news for the sea, fish and air in the area. What we don’t know yet is quite how bad it will be.
That depends on a few things – but the speed of the collision, clouds of filthy black smoke from the fires and the leaked fuel are certainly worrying.
Firstly, it matters what was on board those two massive vessels.
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Analytics firm Vortexa estimates the 183m-long tanker was carrying about 130,000 barrels of jet fuel (kerosene), which is now leaking into the sea.
Jet fuel is not as sticky or viscous as heavier types of oil, thankfully, so it’s less likely to clog the feathers and fur of birds and seals. It can also be broken down by natural bacteria.
But it can still poison fish and kill animals and plants on the shoreline if it makes its way into the soil there.
The Marine Conservation Society has pointed out the site in the Humber estuary is close to some protected areas and is important for seabirds and harbour porpoises.
And both ships will have been powered by a dirtier, heavier kind of oil – likely marine gas oil or heavy fuel oil, though we don’t know the details yet.
Heavy fuel oil is nasty stuff.
Pic: Bartek Smialek/PA
Cheap, thick and tar-like, it can smother animals and is very dangerous if they consume it, and is extremely difficult to clean up. Let’s hope this isn’t creeping around the North Sea already.
We don’t know how much of either the jet fuel or the oil powering the ships has leaked, or how much will be burned off in the violent fires – which themselves are ploughing black smoke and filthy air pollution into the surrounding atmosphere.
And we don’t know for sure what was on the Solong cargo ship and if, or what, will go into the sea.
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It was carrying 15 containers of sodium cyanide among other cargo, according to a report from maritime data provider Lloyd’s List Intelligence.
The container vessel was also transporting an unknown quantity of alcohol, said the casualty report – an assessment of incidents at sea – citing a message from the local coastguard.
Plastic takes hundreds of years to break down, and potentially can choke or trap animals.
Many of us have seen that uncomfortable viral video of a turtle having a straw yanked out of its nose. Previous accidents on cargo ships have seen plastic Lego pieces wash up in Cornwall 25 years later.
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Secondly, the impact depends on the sea and weather conditions around it.
Things like the wind and currents affect how an oil spill spreads in the sea. Scientists can draw up computer models to simulate how the oil could behave.
Thirdly, it matters how quickly this is all tackled and then cleaned up, if necessary, and if it can be.
Usually the slower the response, the worse the impact.
The coastguard has said the incident “remains ongoing” and it has started assessing the “likely counter pollution response” that will be required.
Such a response might need the help of numerous public bodies: the government environment department, the transport department, the Environment Agency and the Maritime and Coastguard Agency.
So for now the best we can hope for – aside from the welfare of the people involved – is that not all the oil is spilled or burnt, that conditions are calm and that rescuers and those cleaning up can work swiftly.
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