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A THIRD are unsure whether they will be mortgage-free by retirement

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Getting on the housing ladder later in life means a third of homeowners are now unsure whether they will be mortgage-free when they retire.

Among homeowners under 40 years old, 45 per cent said they bought their first property ‘much later’ than they had expected, compared to 29 per cent of those over 40.

The increase in the average age of first-time buyers has meant that 32 per cent of mortgage holders now say they are either unsure whether they will pay off their loan by retirement, or have already ruled it out.

Debt-free dream: Paying off a mortgage by retirement is set to become increasingly uncommon, according to new reserach by industry body the Equity Release Council

Debt-free dream: Paying off a mortgage by retirement is set to become increasingly uncommon, according to new reserach by industry body the Equity Release Council

One in five said the idea of retiring mortgage-free was ‘unrealistic’.

This was according to fresh research by the Equity Release Council, which represents lenders offering ‘lifetime’ mortgages to those wanting to access cash tied up in their home.

The research also highlighted a change in attitudes towards carrying debt in to later life.

Almost a quarter of the 5,000 homeowners surveyed said they did not mind if they were still paying off their mortgage past retirement age, while nearly half believed their generation’s attitude to debt in later life was more accepting than their parents’.

Despite getting on to the ladder in later life than previous generations, younger homeowners still had more help raising a deposit than their parents.

The research found that 43 per cent of mortgaged homeowners under the age of 40 relied on financial help from family or friends to buy their first home, compared to just 23 per cent of those aged 40-plus.

Paying a mortgage in retirement is no longer a taboo, according to Jim Boyd of the ERC

Paying a mortgage in retirement is no longer a taboo, according to Jim Boyd of the ERC

The majority – 70 per cent – of mortgaged homeowners felt comfortable with their current level of mortgage debt, rising to three in four of those aged 50-plus. 

Jim Boyd, chief executive of the Equity Release Council, said: ‘There are clear signs that paying a mortgage in retirement is no longer a taboo: for many people it can make the difference between financial hardship and enjoying a more comfortable lifestyle while also supporting family members.

‘The ability to use property wealth to improve your retirement experience is a choice many homeowners have earned through years of paying a mortgage and building an asset. 

‘Lifetime and retirement mortgages allow people to make the most of property as a source of wealth as well as a home.’

Retiring with a mortgage: What are the options?

With people saving less into their pensions than previous generations, and company schemes becoming less generous, owning a home could become increasingly important as a way of funding later life. 

And in some cases, homeowners do not need to have paid off their mortgage in full in order to access the equity tied up in their home.  

Stephen Lowe, group communications director at retirement mortgage lender Just Group, said: ‘People need to stockpile money while working to use in later life, but with many not paying enough into their pensions it is likely the value of property is going to play a bigger role in generating retirement cash.

‘The (median) amount of wealth in active or preserved pensions for people aged 55-64 was just over £91,000 according to official figures up to 2018, which suggests income from private pension wealth will be relatively modest.

‘However, with an average property price of around £250,000 currently and about three-quarters of retirees owning their own homes, there is scope to see the home as a financial ‘power pack’ in later life.’ 

The Equity Release Council research found that people felt taking out a mortgage in later life could benefit them. 

Some 32 per cent saw it as a way to provide money to improve their lifestyles, while 31 per cent saw it as a way to access funds to help out family members.

However, it also identified confusion among younger homeowners about what mortgage products were available to them in later life, with 42 per cent of under 40s saying they did not understand their options.

This is Money outlines the options for using a home to access money for retirement. 

Remortgage your existing loan

More banks are now happy to give an ordinary mortgage to older borrowers.

Leeds, Monmouthshire, Leek and Vernon building societies all have a maximum age of 85 at the end of the term.

Nationwide has a maximum age of 75, or up to 95 if the loan does not exceed 50 per cent loan to value.

Remortgaging is one way for owners to access cash tied up in their homes in later life

Remortgaging is one way for owners to access cash tied up in their homes in later life

This means homeowners could potentially remortgage at a higher loan-to-value and use the extra money to fund their retirement, as long as they could still afford the repayments. 

Rates do not differ depending on age. 

Retirement interest-only mortgage 

Retirement Interest Only mortgages are the newest addition to later-life borrowing options. You have to be over 55 to apply and most lenders restrict the amount you can borrow to between 50 per cent and 70 per cent of the value of your home.

You pay only the interest, which makes the mortgage more affordable for borrowers in retirement.

The debt does not have to be repaid until the last homeowner dies or moves into long-term care.

It can be repaid sooner, penalty free, if the mortgage deal has expired. Some lenders offer overpayment features.

RIO mortgages are useful if you still have a traditional mortgage but you have given up work and want a cheaper option. 

Equity release 

Equity release loans, also known as lifetime mortgages, can help homeowners access cash from their home to use for anything they like. 

This could be used to repay any outstanding mortgage debt, fund retirement or to help loved ones onto the property ladder, for example. 

You must be over 55 to apply, but the loan does not have to be repaid until the last borrower dies or moves into long-term care.  

There are no repayments: instead, the interest builds up and is added to the loan. While rates are still higher than traditional mortgages, they have reduced substantially in recent years and can now be lower than 3 per cent.  

Customers are urged to do their research and consider all of the different options before they decide on what to do with their mortgage and home into retirement

Customers are urged to do their research and consider all of the different options before they decide on what to do with their mortgage and home into retirement

While borrowers who took out equity release loans historically saw interest quickly pile up, modern equity release mortgages have features such as optional interest payments and the choice to repay the loan penalty-free if a joint borrower dies.

However, as the loan involves taking out a new mortgage on their home, borrowers will need to have paid off the majority of their existing one to take advantage.  

Downsizing 

If you have owned your home for some time, its value may have risen. 

Equity release: How it works and advice

This is Money has partnered with Age Partnership, independent advisers who specialise in retirement mortgages and equity release. 

Age Partnership compares deals across the whole of the market and their advisers can help you work out whether equity release is right for you – or whether there are better options. 

Age Partnership’s advisers can also see if those with existing equity release deals can save money by switching. 

>> Find about equity release and get a free no-obligation guide   

You can sell it and use the equity built up to repay the home loan and buy a smaller property.

This may also leave borrowers with money to help fund their retirement. 

Customers are being urged to consider all of the options and to seek professiona advice before making a decision. 

Andrew Morris, senior equity release advisor at broker Age Partnership said: ‘As everyone’s situation is unique, product choice and flexibility is crucial to ensure that they can find a solution that best fits their individual needs. 

‘The vast majority of clients that I speak to do have some mortgage debt. Many of these people want to put an end to their monthly repayments, some just want peace of mind that the mortgage is taken care of in case their health deteriorates. 

‘I explore the different options available, such as downsizing, RIOs, a standard mortgage designed for those in retirement, or equity release. It’s about finding the right solution for each person.’

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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Taoiseach’s family shaped by their working-class roots

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As a special needs assistant at Bunscoil Chríost Rí in Turner’s Cross on the south side of Cork city, Mairéad Martin-Richmond is often asked how she manages financially.

Martin-Richmond, a 59-year-old separated mother of two grown-up children, is a sister of Taoiseach Micheál Martin and says her family’s working-class roots keep her grounded.

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Hines invests in industrial portfolio in Northern Italy

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Hines has reached a binding agreement for an off-market investment to acquire 20 logistics assets located between Emilia Romagna and Lombardy through the Italian fund HEVF II Italy managed by Prelios SGR on behalf of the Hines European Value Fund 2 (HEVF 2). The transaction involves the acquisition of the real estate portfolio from four different selling companies and the simultaneous 15-year lease of the same portfolio to Snatt Logistica Group, a leader in the third-party logistics (3PL) sector focusing exclusively on the fashion industry. The portfolio of 20 logistics assets provides a total of 200,000m² of logistics space around Milan, Parma, Reggio Emilia, and Bologna. They are strategic, well-established logistic centres that enjoy effective, rapid connections with Italy’s main cities and the rest of Europe.

 

“We are pleased to start 2022 with an important investment in the logistics sector that consolidates our presence in the main intersections in Northern Italy. At Hines, we believe in the potential of the logistics sector in Italy and have set an investment target of around €1bn in 2022,” commented Mario Abbadessa, senior managing director & country head of Hines Italy. “We are proud to collaborate with Snatt Logistica Group, which is an international 3PL logistics leader in the luxury fashion industry, and we are certain that we will be able to develop a shared path for growth, guided by common values, including ESG, which is key to our DNA.”

 

Paul White, senior managing director and fund manager for HEVF 2 at Hines, said: “This is an attractive portfolio of assets with a strong, innovative tenant at the forefront of Italy’s fast-growing third-party logistics sector for the fashion industry. We believe that e-commerce will continue to drive long-term demand for high-quality logistics facilities in Italy’s northern cities, pushing the value of these investments forwards, while there is also a significant opportunity to enhance the sustainability performance of existing assets here. This is aligned with our ESG objectives as recognised by GRESB, with HEVF 2 achieving the award of Overall Global Sector Leader in the Diversified Office/Retail category for sustainability performance in 2021.”

 

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Latest Coveney gaffe shows new knack of ‘making small problems big’

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“Don’t mind your press releases,” a Fine Gael source was told by a more experienced hand on their first day in Leinster House; “If you want something out there, just say it in the PP [parliamentary party meeting].”

It’s a truism of Irish politics that these meetings – especially those of the two larger Government parties – leak like the proverbial sieve. This got worse during Covid, when virtual meetings meant members were unencumbered by the need to even appear interested, and journalists were freely briefed in real time. The content of the meeting, coupled with the observations of parliamentarians – arch, knowing, and unfiltered – populated twitter streams and news copy.

So, when Simon Coveney’s remarks about his surprise at the meeting between the Russian ambassador to Ireland and the head of the defence forces were promptly headline news, it can’t have been too much of a shock. “He knows he’s speaking at the leakiest meeting in Leinster House,” observed a source present.

Still, some in the room thought when Michael Creed raised the issue, Coveney would just “warble on like you normally do”. Instead, after a gap of several minutes while other questions were fielded, the Minister for Defence bit down. He said he was “surprised to put it mildly”, several sources present said, and questioned the judgement of it.

Afterwards, sources close to Coveney quickly asserted the Minister meant the tweet from the Russians, and the accompanying picture, were the issue, not the meeting. But multiple sources at the parliamentary party interpreted it as referring to the meeting, and what’s more, as a direct rebuke to the chief of staff. “The tone I got was he was f***ing livid,” said one source.

Either way, the remark was leaked, it was controversial, and early the next morning, Coveney was mending fences in the Dáil, expressing confidence in Clancy and contrition for having brought him into the line of political fire.

A kind interpretation, offered by some at the meeting, is that he feels honour-bound to respond fully to questions from parliamentary colleagues. There is likely truth to that. But equally, many believe he would have known his comments would have been controversial, open to interpretation as a rebuke to the head of the Defence Forces, and that it was meant as a shot across the bows.

Others postulate that – perhaps more worryingly – he didn’t detect the political risk inherent in the remarks, which the Opposition would say had undermined the Chief of Staff . “Simon should have known this was going to result in public comment,” said another person there.

That, in truth is the bigger concern – that Coveney’s bad run of form is down to a blunted political dexterity. “You’d know by the way he said it he wasn’t trying to cause controversy,” one colleague said – adding that it was, however, evidence of Coveney’s new knack of “making small problems into big ones”.

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