‘Tough decisions’ for households as figures show rise in later life mortgages

Concerns that some homeowners are making “tough decisions” have been raised after it emerged that £5.2 billion of later life mortgages were handed out to over-55s in the second quarter of this year.

The figure, released by UK Finance, marks a 3% increase compared with the same period a year earlier.

Its later life lending trends data covers “mainstream” lending to older borrowers, as well as specialist products.

UK Finance said 33,130 new loans were advanced to older borrowers in the second quarter of this year, up by 0.49% annually.

Mary-Lou Press, president of NAEA (National Association of Estate Agents) Propertymark, said: “While it is positive lenders are confident to better serve this age group than ever before, it can also be the case that tough decisions are being made by people who are finding affordability a challenge earlier in life and considering taking finance over longer periods than any point previously.”

UK Finance’s figures for the second quarter of 2025 showed 5,830 new lifetime mortgages were advanced, which was up by 3.7% annually.

The value of this lending was £520 million – a 10.6% rise compared with the same quarter a year earlier.

There were 305 retirement interest-only mortgages advanced in the second quarter, down 2.6% annually.

The value of this lending was £25 million, which was down by 10.7% annually.

A retirement interest-only mortgage allows borrowers to pay just the monthly amounts of interest throughout the term until either the death of the last remaining borrower or when the last remaining borrower moves into long-term care. When one of these events happens, the amount outstanding must be repaid in full.

Meanwhile, with a lifetime mortgage, monthly payments are not required. The mortgage is repayable upon death of the last remaining borrower or when the last remaining borrower moves into long term care.

Where no monthly payments are made, the interest builds over the lifetime of the mortgage, meaning the amount borrowers owe at the end of the mortgage will be more than the amount they borrowed. However, many lenders will allow borrowers to make full or partial interest payments.

Clare Stinton, head of workplace saving analysis at Hargreaves Lansdown, said: “Later life lending is on the rise and it’s changing the way we need to think about retirement.”

She said a “savings and resilience barometer” from Hargreaves Lansdown indicated that only 43% of households have enough pension savings for an adequate retirement income “and the potential for paying mortgages into retirement makes this even more challenging”.

She said that in the second quarter of 2025, “4,780 residential mortgages worth £570 million were taken out by borrowers over the age of 70.

“Some will be choosing to work longer or part-time, others may plan to use the tax-free cash from their pension to chip away at the debt. Either way, it’s a financial burden that previous generations rarely carried into retirement.

“This trend looks set to continue, with house costs sky-high, younger buyers are getting onto the property ladder later in life and often with longer mortgage terms. Paying a mortgage into our 60s, or beyond, could soon become the new normal.

“It makes an even stronger case for paying into your pension as early as possible – the more you put in now, the more time compound growth has to do the heavy lifting for you.”