'The generation gap between mortgagors and pensioners is diminishing'
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Articles and web pages aimed at first-time buyers often feature pictures of couples in their 20s or 30s, like the image above.
Likewise, content about pensioners is usually accompanied by stock photos of white-haired, walking aid-equipped octogenarians, despite the fact some pensioners may be in their mid-50s (FT Adviser may be guilty as charged).
Mortgage borrowers and pensioners may therefore seem worlds apart, but the challenges that aspiring first-time buyers face mean the two demographics are coming together.
The aforementioned stereotype of first-time buyers is not necessarily wrong. Five in eight mortgages (63 per cent) were taken out by first-time buyers in joint names last year, according to analysis from Halifax.
The lender also found that the average first-time buyer was over the age of 30 in all regions and nations last year, with the UK average at 32 years old.
The promise of more homes has so far not been enough
But buying a first home is not a milestone that everybody celebrates in their 30s. Data from Santander shows that nearly one in five first-time buyers (18 per cent) were at least 40 years old in the first quarter of 2024.
And like some kind of crossover, the oldest customer the bank helped to buy their first home so far this year was 67 years old.
Even if a first-time buyer fits the average profile of being in their 30s, mortgages are increasingly encroaching on pensions and retirement.
If the traditional view is that borrowers pay off their mortgage before retiring, with a sufficient number of working years left to boost their pension savings, this is something that is being dispelled.
A Freedom of Information request by LCP partner Steve Webb found year-on-year increases in the share of new mortgages with a term ending beyond the state pension age. Borrowers under the age of 40 were the fastest-growing group to take out such mortgages.
While mortgage terms can be reduced later down the line, and inflation can favour borrowers in the long-run, the challenges of delaying home ownership mean perceptions about retirement are also being reconsidered.
At a glance: what parties have pledged on housing
Conservatives
- Deliver 1.6mn homes.
- Permanently abolish stamp duty for homes up to £425,000 for first-time buyers.
- Introduce a new Help to Buy scheme to provide first-time buyers with an equity loan of up to 20 per cent towards the cost of a new-build home.
- Continue the mortgage guarantee scheme.
Green Party
- Provide 150,000 new social homes a year and end Right to Buy.
- Empower local authorities to introduce rent controls.
- End no-fault evictions.
- Transform the planning system so new developments come with access to public services and green spaces are protected.
Labour
- Planning reform to build 1.5mn homes.
- A permanent Freedom to Buy mortgage guarantee scheme.
- ‘First dibs’ for local people on new developments.
- Reform compulsory purchase rules to get homes built.
Liberal Democrats
- Increase building of new homes to 380,000 a year, including 150,000 social homes a year.
- Ban no-fault evictions and make three-year tenancies the default.
- Give local authorities the powers to end Right to Buy in their areas.
- Abolish residential leaseholds and cap ground rents to a nominal fee.
- Introduce a new Rent to Own model for social housing.
Reform UK
- Review the planning system: fast track planning and tax incentives for development of brownfield sites.
- Reform social housing law.
- Scrap the 2019 tax changes for landlords to encourage smaller landlords into rental markets.
- Abolish the Renters (Reform) Bill and boost monitoring, appeals and enforcement process.
Paying off a mortgage while being eligible for the state pension, for example, is a notion that we may have to become more familiar with. Research from LV last year found that a third of borrowers (32 per cent) did not think they would pay off their mortgage by the age of 65.
In 2022, more than half of people owned their own home by age 36 years. This has increased from 32 years in 2004, according to the Office for National Statistics
Building new homes is often cited as a solution to increasing home ownership, but the promise of more homes has so far not been enough.
Figures available up to the 2022-23 financial year show that "net additional dwellings" peaked at 248,590 in 2019-20. The government had set a target of 300,000 new homes a year by the middle of this decade.
Whatever the next government has in store for aspiring first-time buyers will not just have an impact on their route to home ownership, but their route to a secure retirement too.
Chloe Cheung is a senior features writer at FT Adviser
