Research shows older mortgaged homeowners struggling to save for retirement

Research carried out by the Equity Release Council and Canada Life found that 18% of UK homeowners with a mortgage aged 55 and over, around 515,000 people, say that having to make repayments is stopping them from saving more for retirement¹. The same research found that 18% of older mortgaged homeowners do not expect to retire mortgage-free, while another 19% are not sure and 60% are confident of clearing their debt¹. It also found that 16% of mortgage holders aged 55 and over say the burden of mortgage debt is holding them back from retiring completely, up from 14% in 2021, and that 10% say their loan is stopping them reducing their hours at work, against 4% in 2021¹.

Separate research from Key Later Life Finance found that the value of funds freed up through equity release and used to repay an existing mortgage rose from 30% in 2022 to 34% last year¹. The report links the rise to higher monthly mortgage repayment costs for many older borrowers¹. It estimates that 2.86 million people aged 55 and over have home loans¹.

The figures on retirement expectations and working hours are set out below.

On the mechanics of using later-life lending to clear a home loan, the report states that an existing mortgage must be repaid in full as part of the equity release process¹. Application forms include a section for existing mortgages, listing the lender, the mortgage reference and an approximate balance to be repaid, after which an equity release solicitor contacts the current lender for a formal redemption statement¹. Where equity release is taken for another purpose, the mortgage must still be cleared first, so enough must be released to repay it plus any additional amount required¹.

The report also sets out drawbacks. Making no repayments means paying far more than was borrowed because interest compounds, which could wipe out the property's value entirely¹. Repaying the loan early often triggers an early repayment charge¹. Borrowing through equity release will often reduce the size of an estate and what can be left to loved ones, because the lender is repaid before the rest is divided among beneficiaries¹. It can also affect means-tested benefits such as pension credit and reduced council tax¹. On lifetime mortgages, the most common form of equity release, regulated advice from a qualified equity release adviser is a requirement of the Financial Conduct Authority¹.

Why it matters for households

The findings concern homeowners aged 55 and over who still have a mortgage, a group estimated at 2.86 million people¹. For the 18% who say repayments are blocking retirement saving, and the 16% who say debt is delaying full retirement, the constraint is the monthly payment itself rather than a choice about when to stop work¹. The rise in the share of equity release money used to clear mortgages, from 30% in 2022 to 34% last year, indicates that more borrowers are using property wealth to settle an existing loan rather than for other purposes¹.

Anyone clearing a mortgage this way ends up with no required monthly payment on the new borrowing, but the debt remains secured on the home and interest rolls up where nothing is paid¹. That affects the value of the estate and, for those on means-tested benefits, the amount of support received¹. Early repayment charges can apply if the plan is later unwound¹. The no negative equity guarantee and the treatment of benefits and inheritance are separate features of these products, and the downsides of releasing equity are set out in more detail elsewhere on this site.

What happens next

No further dates or steps were reported alongside the research. The report notes that regulated advice is required before taking out a lifetime mortgage, and that providers selling equity release must offer advice¹. It adds that the Equity Release Council holds a directory of advisers with equity release experience, and that brokers can look across the market rather than being restricted to one or two firms¹.