"The number of people over 55 renting privately has surged by over 70% in the past decade, outpacing population growth by a factor of 3.5."
The financial landscape, particularly in the housing sector, is evolving in response to demographic shifts - but not fast enough. With people living longer and working later into life, traditional mortgage terms, I believe, are increasingly seen as inadequate. The idea of extending the term of residential mortgages indefinitely or up to 90 years should be gaining traction as a potential solution. This proposition will aim to address the growing trend of older adults renting rather than owning homes.
The rising trend of renting among older adults
Recent data underscores a significant shift in housing patterns among older adults. According to a YouGov poll for the National Housing Federation, the number of people over 55 renting privately has surged by over 70% in the past decade, outpacing population growth by a factor of 3.5. Additionally, The Mortgage Works reports an 80% increase in renters aged 55 to 64 over the same period. These statistics highlight a pressing need for financial instruments that accommodate the changing realities of aging populations. The ONS survey in England and Wales said between 2005 and 2015, the number of men divorcing aged 65 and over went up by 23% and the number of women of the same age divorcing increased by 38%. Some of these divorcees have ended up in either the private rental market or in social housing. Either way they have to pay to put a roof over their heads. Many of them have not had enough money after their divorces to enable them to purchase a home of their own, although there is the option of an interest-only mortgage but there are barriers to this too due to the amount of equity needed as a deposit.
The case for indefinite or 90-year mortgage terms
1. Longevity and extended working life: As life expectancy increases, more people remain in the workforce beyond traditional retirement age. This shift means older adults have more earning potential over a longer period, making longer mortgage terms feasible and practical.
2. Stability and security: Longer mortgage terms can provide stability for older adults who may otherwise face the uncertainty of renting. Homeownership offers a sense of security and permanence that renting cannot match, particularly in later years.
3. Affordability: Extending mortgage terms reduces monthly payments, making homeownership more affordable for older adults on fixed incomes or those who are still working part-time. This could be a crucial factor in helping more people transition from renting to owning their homes.
4. Financial planning: Longer mortgage terms can be integrated into comprehensive financial planning for retirement. They offer flexibility, allowing older adults to use their home equity in various ways, including reverse mortgages or as collateral for other financial needs.
Potential challenges and considerations
1. Risk management: Lenders need to assess and manage the risks associated with longer mortgage terms. This includes evaluating the likelihood of defaults and the impact of extended terms on their financial health.
2. Regulatory framework: The introduction of indefinite or 90-year mortgages requires a supportive regulatory environment. Policymakers must ensure that these products are designed to protect consumers while maintaining financial stability.
3. Market adaptation: The housing market must adapt to accommodate longer mortgage terms. This includes changes in how properties are valued and insured, as well as how estate planning and inheritance issues are managed.
Extending residential mortgage terms indefinitely or up to 90 years represents a forward-thinking response to the evolving needs of an aging population. By aligning mortgage products with longer life expectancies and extended working lives, we can offer older adults greater financial security and stability. As more people over 55 find themselves renting, innovative solutions like extended mortgage terms are essential to ensuring that homeownership remains a viable and attractive option well into the later stages of life.
