First-time buyers taking 30-year-plus terms risk paying into pension age
More first-time buyers are taking on mortgage terms that stretch into their retirement years, as new survey data shows a majority of UK adults would rather delay retirement than give up on outright home ownership.
Some 62% of first-time buyers with a mortgage had a repayment term of 30 years or more in 2024/25, up from 47% five years earlier, according to the Ministry of Housing, Communities and Local Government's English Housing Survey. The average age of a new homeowner in England was 34, the data showed.
That trend toward later purchases and longer terms is now colliding with retirement timelines, according to separate research from PensionBee. The pension provider's survey of 2,000 UK adults found 51% would delay retirement to own their home outright, while just 9% would retire earlier if it meant renting in later life. Some 45% cited outright ownership as the most important factor for retirement security, against 36% who prioritised a large pension pot.
Affordability pressures near lenders' limits
Separate analysis of the FCA's Financial Lives Survey, carried out by risk consultancy Broadstone, found 14% of homeowners had outstanding mortgage debt worth at least four times their annual income, up from 11% seven years earlier. Broadstone's Paul Matthews said lenders typically cap borrowing at 4.5 times annual household income, underlining how close a growing share of borrowers now sit to that ceiling.
PensionBee put the average first-time buyer mortgage term at 31 years and the average first-time buyer's age at 32, implying the typical mortgage clears three years after State Pension age. For those on the longest terms, which now account for a majority of new first-time buyer mortgages, retirement and mortgage payments could overlap entirely, PensionBee said.
Wider pension-industry data backs the trend
The pressure is not confined to individual survey findings. A Pensions Policy Institute report for the Association of British Insurers, published in July, found 65% of people aged 45 to 65 were homeowners, around 15 percentage points lower than two decades ago. The report projected that owner-occupier pensioner households would fall from 79% to 64% by 2044, while private renting among pensioner households would rise from 6% to 18% over the same period.
PensionBee's research put the cost of renting a two-bedroom home through retirement at between £200,000 and £400,000, against median private pension wealth of around £154,000 for those aged 60 to 64. Just 19% of respondents felt very confident their pension would cover their housing costs in retirement, PensionBee found, with 37% either not confident or not having considered the question.
A separate PensionBee poll found 51% of adults aged 25 to 34 said they would consider using a government scheme allowing pension savings to be withdrawn early to fund a first home, if one existed. PensionBee modelling estimated that redirecting £20,000 from a pension at age 30 for this purpose could cost more than £120,000 in lost retirement savings by age 67.
Becky O'Connor, head of pensions at PensionBee, said prioritising homeownership over pension saving "might be making a rational financial decision" given the costs it removes in retirement.
What it means for brokers
The data points to growing client demand for products and advice that bridge mortgage and retirement planning, including later-term mortgages, structured overpayment strategies, and retirement interest-only options for borrowers approaching pension age with debt outstanding. The PPI report warned that without "significant" improvements in affordability or ownership rates, more people would enter retirement carrying persistent housing costs – a dynamic intermediaries advising older borrowers are increasingly likely to encounter at the point of application.
