Debt free retirement a thing of the past?

Research has revealed that approximately 500,000 homeowners are still paying off their mortgages after retiring from work.

High house prices mean that thousands are still paying off their home loans when they are 70 or even older. Many live below the poverty line and cut back on essentials such as heating and food in order to meet monthly repayments.

According to a study, the average annual income of a retired person is only £10,608. In reality many are forced to cope on even less, making their monthly mortgage bill unmanageable.

Falling endowment payouts have led to a shortfall for many retired people, which means they have to raid their savings to meet repayments. Thousands of pensioners are likely to be forced to move out of their homes at an age when they are least able to cope with such upheaval.

To live debt free the main options appear to be purchasing a smaller home or uprooting to a less desirable, cheaper area. The main culprit is the rise in house prices, which have almost trebled over the last eight years.

More fortunate individuals managed to pay off relatively small mortgages before their 50th birthday. But this was in the days before the boom in house prices. The average first-time buyer now has to cope with a mortgage of £114,000, compared with £82,000 three years ago.

House prices continue to rise nationwide, albeit at a slower rate. Endowment mortgages were popular in the 1980s when buyers were told that they offered a good way to pay for your home and make some extra money.

When endowments turned out to be worth much less than hoped for, thousands were left disappointed. Repayment deals are now preferred by most home buyers as they leave no danger of a shortfall.

An Abbey spokesman said: 'For some people who reach retirement age with no long-term savings or income other than a state pension and the equity in their house, the prospect of a few more years' work could be a necessity rather than a choice.'

Sep 28, 2005
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