Home buying market about to be turned on its head - new report

Posted On: 
3rd May 2017

New independent study reveals that home ownership is changing in response to economic, demographic and housing market trends, making borrowing into older age more common.

For sale signs on a property The BSA report shows an increase in new mortgages with a term beyond age 65.
PA Images

A new study by the International Longevity Centre-UK (ILC-UK), supported by the Building Societies Association (BSA) has found that borrowing into older age is likely to move from niche to mainstream within the next decade.  The amount of mortgage debt held by over 65s is set to increase by more than £19 billion by 2030 (from £20.1 billion to £39.9 billion).

The report reveals that current economic trends such as house price inflation, tighter credit conditions and low real wage growth mean that there is likely to be a significant shift in the customer base of the mortgage market over the next 13 years. The mortgage market is witnessing an evolution from the ‘traditional route’ of individuals buying their first homes in their 20s, trading up in their 30s and 40s, paying off debt in their 50s and 60s and then entering older age with little or no mortgage debt. 

Since the financial crisis, home ownership amongst 20-29 year olds has fallen from 53% to 38%.  For those between 30-39 years old home ownership has fallen from 73% to 65%.  Today, many first-time buyers are delayed from stepping onto the property ladder by factors including low supply of new homes and higher house prices, greater student debt, persistent low real income growth and challenges in saving for a deposit.

As the home ownership life cycle shifts, the time of life by which mortgages are paid off is shifting too, the ILC-UK research has shown that over six per cent, or 1.42 million people aged 35 to 64 will not have paid off their mortgage before retirement given the current term of their loan. If nothing changes, it will become more common for consumers to buy for the first time in their late 30s or 40s, with longer mortgage terms from the outset.  They will be more likely to trade up later in life and repay at least part of the mortgage from retirement income or draw more to fund needs in later life.  By 2030, the ILC-UK projects that £3.3 trillion or 58% of all housing wealth in the UK will be owned by the over 65s.

The challenge now is whether action should be taken to try and maintain the ‘traditional’ market or focus on adapting to a changing market.   Increasing housing supply across all tenures must be the number one priority for politicians, as well as recognising shared ownership as a tenure in its own right.

Industry must respond to reflect the changing needs of customers, including an increasingly intergenerational approach to home ownership, as parents and grandparents borrow to release some of their housing wealth to support the younger generation.