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Having a mortgage in later life is becoming more socially acceptable.

Historically, it was desirable to repay your mortgage before retirement fully; attitudes seem to be changing.

One potential cause of this is a decade of historically low interest rates combined with a lack of pension savings.

When you can borrow at less than 2% it seems like a simple route to liquidity and the cashflow we may need in order to live a comfortable life now however we rates to return to historically average rates in excess of 5% at any point then this mortgage goes from being cheap money to a serious and credible threat to your financial security.

New research from the Equity Release Council (ERC) found that 34% of homeowners think it is more acceptable to have a mortgage in later life.

The research, published as part of their latest Home Advantage report, also found that 32% of homeowners with mortgage debt do not believe they will pay it off by the time they retire.

According to the report, those in their 30s are almost twice as likely to agree than disagree that having a mortgage in later life can be a positive step, providing more financial freedom and flexibility.

When speaking to homeowners in their 60s, the researchers found that 38% believe their mortgage is an investment in their future, allowing them to build up an asset over time.

More respondents in their 60s expressed an interest in accessing money from their property in later life, with 57% saying they would consider equity release in later life.

However, almost two-thirds of people in their 60s didn’t know the difference between lifetime and retirement mortgages, suggesting more financial education is needed to explain the differences.

Alice Watson, Head of Marketing, insurance at Canada Life, said:

“Property wealth has long been an important element of retirement planning. However, we all know that many people are finding it harder and harder to get on the property ladder, with many doing so much later than the previous generation. In fact, 54% of people who have not yet bought a home believe it is unrealistic they ever will.

“For those who do manage to become homeowners the report shows that they will enjoy a significant financial safety net compared to long-term renters. While they may be borrowing more and paying off mortgages for longer than previous generations, the boost to their financial wellbeing will be considerable.

“This normalisation of taking debt in later life means that property wealth will increasingly be used as another element of retirement income, and continue to be a way of funding the individual life ambitions and goals that we all carry.”

At Juniper Wealth we understand why people in their 30s are borrowing longer and longer. When you take high property prices and add in cheap interest rates and a splash of longevity it makes sense to borrow into your late 60s. However, I feel that using the equity in your home to fund your retirement should not be plan A or even plan B.

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