The increase in lending into retirement

Two decades ago, it was unusual for people to enter retirement with a mortgage to pay. Lending into retirement has gained prominence recently.

Data from the Bank of England (BoE) shows that:

  • In Q4 2023, about 42% of new mortgages (91,394) had end dates beyond the state pension age. 
  • This is an increase from 38% in Q4 2022 and 31% in Q4 2021.
  • Individuals aged 30 to 39 accounted for 30,943 of the new mortgages extending beyond state pension age
  • Individuals aged 40 to 49 accounted for 32,305. 
  • It's estimated that around one million new mortgages with end dates beyond the state pension age have been issued over the past three years.

Changing Attitudes Toward Retirement Borrowing

Traditionally, the prevailing mindset was that mortgages should be paid off before retirement. However, each mortgage borrower's situation is unique, and this is particularly true for those approaching or in retirement. 

The rise in the BoE base rate has significantly affected mortgage affordability for some, leading to an increased trend in extending mortgage terms, a trend likely to continue. To support homeownership aspirations across all ages, it's crucial to move away from the perception that lending to retirees is inherently risky.

Financial Viability of Retirement Mortgages

As a specialist lender, we have extensive experience in assisting borrowers with their mortgage needs as they approach or enter retirement. There are several scenarios where maintaining a mortgage into retirement can be financially sound.

  • Some retirees might have sufficient income from private pensions to cover mortgage payments.
  • Retirees might hold significant investments and savings that yield high returns, making it more sensible to keep these assets rather than liquidate them to pay off a mortgage. 
  • Some borrowers may expect a lump sum payout before or during retirement (for example from a pension fund) that can be used to reduce their mortgage.

Our USPs

While we do not impose an upper age limit on lending and provide mortgages to those in or nearing retirement, we ensure a thorough assessment of each borrower's affordability and retirement income.

  • No maximum age on repayment basis
  • Will take earned income to 75
  • No requirement of pension contributions if using earned income to age 75
  • Pension projections required if taking term beyond age 75
  • 80% LTV if lending into retirement
  • 70% LTV if already retired

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About Dudley Building Society

We have been providing mortgages and savings accounts on a local and national scale since 1858. With five branches in the region, we remain committed to its core philosophy of serving the communities in and around the Black Country and West Midlands area. We have selected local trusted partners and carefully selected intermediaries to provide advice to mortgage customers.

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