Rising Trend – More Older Brits Aspire to Own Homes

Recent data from Legal & General Mortgage Services highlights an interesting shift in the UK’s housing market: a significant rise in older individuals, particularly those in their 50s and 60s, stepping into the housing market as first-time buyers.

In the first quarter of 2024, there was a noticeable 13% increase in people aged 56 to 65 looking to move into home ownership, in comparison to the same period in the previous year. This information comes from the company’s Ignite platform, a tool used by brokers to find mortgage product information. It’s worth noting that Legal & General Mortgage Services plays a significant role in the UK housing market, being involved in one out of every four mortgages.

Young vs. Old

Between April 2023 and April 2024, first-time buyers made up 38% of potential buyers in the UK, with the average age being 33. On behalf of these buyers, advisers searched for mortgages averaging a loan value of £217,125.

When it comes to the duration of these mortgages, the terms 31 to 35 years were the most commonly searched, followed by 26 to 30 years, and then 36 to 40 years. This distribution suggests that many are opting for longer mortgage terms, possibly to manage the high costs associated with buying a home.

Economic Conditions and Homeownership Trends

Kevin Roberts, the Managing Director of Legal & General Mortgage Services, remarked on the ongoing strong desire to own a home, even among those who are waiting longer to make their first purchase. Roberts suggests that as economic conditions improve, including potential decreases in inflation and adjustments to the Bank of England’s base rate, there could be an increase in first-time buyer activity.

High rental prices and more affordable mortgage rates at the beginning of the year are among the factors driving this trend, making homeownership a more attractive option for many.

Retirement Risks with Longer Mortgage Terms

However, the shift towards older age homeownership and longer mortgage terms raises concerns about financial security in retirement. Sir Steve Webb, a former pensions minister and now a partner at LCP (Lane Clark & Peacock), warns that longer mortgage terms, which now often extend beyond the state pension age, might compromise retirement prospects. Indeed, data from the Bank of England, obtained through a freedom of information request, shows that 42% of new mortgages in the last quarter of 2023 had terms that would extend past the state pension age.

Emily Shepperd, Chief Operating Officer at the Financial Conduct Authority (FCA), notes a trend where more mortgages are projected to mature around or after the state retirement age, predicting that by 2050, almost 10% of all loans will belong to mortgage customers over 67 years old.

Lender Practices and Long-Term Affordability

Karina Hutchins from UK Finance emphasises that lenders are adhering to responsible lending rules set by the FCA, especially when considering applications that may extend into the borrower’s retirement. Common practices include requiring proof of pension for those nearing retirement to ensure that they can afford the mortgage based on their anticipated retirement income.