Millions of mortgage holders expect to still be paying off mortgages at age 65 and some will dip into pensions to do so, according to new research.

Rising housing costs mean the mortgage 'dream' is over for many mortgage holders, says LV=.

Many of today's mortgage holders will face paying for home loans for years past normal retirement age and some will never clear the loans, the research found.

The study for the LV= and Wellbeing Monitor - covering 4,000 UK adults - found that 12% (1.5m) of retirees said they still had outstanding mortgage debt when they retired, with this number set to grow.

Of those who had outstanding mortgage debt when they retired, more than half (56%) said they used their pension to pay off their mortgage debts. 

Some 6% said they continued to do some paid work to help pay off the loan, 5% downsized and 5% used equity release. Only 4% spoke to a financial adviser, the study found.

For those with a mortgage who have yet to retire a third (33% or 4.5m) of mortgage holders do not believe they will be able to pay off their mortgage by 65. Some 9% (1.2m) of mortgage holders are unsure if they will ever clear their home loan.

The average amount to pay off at retirement is £43,000, but 19% (277,000) had debts of £50,000 - £99,000 and 11% (165,000) more than £100,000 

Those aged 55-64 said they were considering several ways to pay off mortgage debt in retirement. Half would carry on with paid work, a quarter would use their pension to pay off their mortgage, 24% would downsize, 9% would use equity release and 8% would rent out a room.

Clive Bolton, managing director of protection, savings and retirement at LV=, said: “The LV= Wealth and Wellbeing Monitor highlights how for millions of people the dream of a mortgage–free retirement is over. The huge rise in house prices – and accompanying longer mortgage terms - mean millions of people will go past their retirement age with large mortgages to pay.  

“Retirement is a major life change for people. The switch from bringing in a regular income to living off pensions and savings for the rest of your life can put a strain on finances. A mortgage is often a household’s largest monthly bill and LV=’s research shows that millions of people already worry about running out of money in retirement. 

“A large mortgage will add to their concerns, particularly if interest rates rise significantly, and paying a large mortgage means many people will draw down money from their pension at a rate that is unsustainable.”