New data on mortgage lending from the Bank of England has revealed that lending into retirement has remained at a high level despite falling mortgage rates. 

In the most recent quarter for which data is available (Q2 2024) just over two in five of all new mortgages had terms which run past pension age. 

That compares with barely three in 10 new mortgages at the end of 2021.

The data was obtained by former pensions minister and LCP partner Steve Webb who has estimated that more than a million new mortgages with terms running past pension age have been issued since the end of 2021 .

He said that over the last two years there’s been a 30% increase in the absolute number of under-40s taking out mortgages set to run into retirement.

One reason for these exceptionally long mortgage terms may be affordability, he said, with younger borrowers opting for extended terms in response to high interest rates. 

However, despite mortgage rates now seeming to be on a downward trajectory, the proportion of new mortgages with these long durations remains at around two in five.

Mr Webb said: “There is increasing evidence that taking out a mortgage which runs past pension age is an entrenched feature of the mortgage market rather than a temporary blip. 

“This has profound implications for retirement planning, as it is likely to mean that savers may end up using up already inadequate pension pots to clear a mortgage balance. 

“Anyone involved in helping today’s workers plan for their retirement must now factor in the possibility that housing costs will run into retirement or will have to be funded from already meagre pension pots”.

FCA data showed that the average interest rate on new mortgages peaked at 5.34% in Q4 2023 and had fallen to 4.87% in Q2 2024