Almost one in four (22%) homeowners with a mortgage – equivalent to 2.8 million people – say repayments are stopping them from saving more for retirement, according to new findings from the Equity Release Council and Canada Life.
This figure spiked since 2021, when only 14% said the same.
This includes more than half a million (515,067) homeowners who are still paying a mortgage beyond the age of 55.
Almost one in six (16%) of this group said the burden of mortgage debt is holding them back from retiring completely, up from 14% in 2021.
One in 10 (10%) said their loan is stopping them from reducing their hours at work, more than double the number impacted in 2021 (4%).
The findings came from the ERC’s Home Advantage study of 5,000 adults’ financial attitudes and experiences.
The data revealed how the strain of managing their mortgages – which often involve larger sums and longer terms than previous generations – has had a major impact on wellbeing and financial plans, exacerbated by higher interest rates.
Among all homeowners with a mortgage, 21% said their current mortgage debt was preventing them from affording a comfortable lifestyle from day-to-day, up from 13% in 2021.
Mortgage worries were also keeping 13% of people awake at night, preventing 11% from moving house and prompting 7% to pause family plans.
The study, supported by Canada Life, showed that 90% of homeowners said it was important to be mortgage-free by the time they retire.
However, only two-thirds (66%) of those with mortgages believed they would clear them before they retire, dropping to just 60% of those aged 55 and over.
Among those aged 55 and over, one in five (20%) mortgaged homeowners – equivalent to 572,297 people – did not expect to retire mortgage-free, while another 19% were not sure.
The changing landscape was prompting more homeowners to bank on their property wealth and later life mortgages to help manage their money as they grow older.
Almost one in three (31%) consumers believed accessing property wealth in later life could improve their finances and boost their retirement income: a significant rise from 25% in 2021.
More than one in four (26%) said that a later life mortgage could be a useful way to boost retirement income, an increase of five percentage points since 2021.
Over the past five years, over-55s have taken out 201,575 new equity release plans to support their later life finances.
This level of activity represented a 30% rise compared in the previous five years, when 155,082 new plans were taken out between 2014 and 2018.
Jim Boyd, CEO of the Equity Release Council, said: “With higher interest rates leading many people’s monthly mortgage payments to rise, this harsh reality is making it difficult for homeowners to prioritise retirement savings alongside their mortgage and wider bills.
“While this might be something they can just about manage in the short term, the real concern of this spike in mortgage costs is the strain it puts on people’s long-term financial resilience.
“It’s truly alarming that mortgage debt has become so uncomfortable that people are having to putting off starting a family, ending a relationship, or changing career.
“Having to push back key milestones and life moments like this is not only disheartening but could ultimately be detrimental to society as a whole.”
He continued: “Rather than struggle against the tide, we need to recognise we are in a new era where the goal of becoming mortgage free will, for some people, be less important than the practical need to access property wealth in later life.
“With approximately £2.63tn of net housing wealth in homes owned by people aged 65 or over, there are clear signs that a shift in the national conscience is underway and property wealth is stepping into the spotlight for retirement planning conversations.”
Tom Evans, MD retirement, Canada Life, added: “Retirement feels like a distant dream for many, and having worked hard throughout life, it’s logical to hope or even expect to be mortgage free when reaching this milestone.
“As the past few years has shown us though, unexpected changes can happen, with plans getting turned on their head. As such, many of us will face the possibility of having to adjust our ways of living in retirement.
“Whilst this may feel unsettling, it’s important to remember that there are always options. Lifetime mortgages now offer greater flexibility to individual needs, and so more people may consider the prospect of using property wealth alongside other assets to fund retirement.
“Our customer data shows that paying off an existing mortgage has been the top reason for releasing equity for the past six years, but this is just one of many drivers for customers releasing value from their homes.
“For those considering releasing equity, it’s important to do lots of research discuss it with your family first and then engage with a professional financial adviser.”
