Banks and building societies have traditionally been reluctant to lend into retirement, so it can be tough to get affordable finance or benefit from best-buy deals.
Aegon pensions director Steven Cameron said: “Inflated property prices mean that those getting onto the property ladder are doing so at later ages and are borrowing more for longer.”
Those who cannot clear their mortgage will either need to pay from their retirement income or carry on working.
“One in four people expect to still be working at 70, but not everyone will be fit enough or want to do so,” he said.
Lenders are providing a growing choice of later life mortgages, so older borrowers who feel stuck with their existing lender should see if others offer a better option.
Later life lending specialist Hodge Lifetime said 200,000 out of a total 1.7 million interest-only mortgages are set to mature by 2020 and many will struggle to raise funds to pay off the capital.
Nearly one in five risk losing their homes as they will have shortfalls, the Financial Conduct Authority recently warned.
Hodge aims its mortgages specifically at older borrowers, including its Retirement Interest Only 55+ mortgage and the 55+ mortgage, available through financial advisers.
The mortgage can be taken out up to age 85 and run to 95 if needed, with borrowers making monthly interest payments, as on a standard mortgage, but repaying the capital when they either downsize, die or move into care.
Business development director Steve Cox explained that older homeowners have more options now: “Even if you’ve been turned down by a standard lender later in life, it doesn’t mean you won’t get a mortgage with a specialist.”
Ishaan Malhi, founder of mortgage broker Trussle, said as more people work into their later years, lenders are increasingly stretching their terms beyond 65.
He said: “Most will do a plausibility test to check if it’s affordable past state pension age, after taking into account your income from investments, maintenance, pensions and state benefits.”
Malhi also recommended making overpayments to shorten your term if you’ve fallen behind: “Most fixed deals let you overpay up to 10 per cent of the balance a year without penalty and downsizing to something smaller’s an option.”
David Hollingworth, mortgage broker at London & Country, said mainstream lenders still set conservative limits when it comes to maximum ages: “NatWest won’t allow the mortgage term to go beyond 70.
Barclays may do, but only on an individual basis.”
Others are more flexible, he said, with Halifax lending to 80 while Nationwide will consider those who have already retired up to 85.
“Smaller building societies are ahead of the curve, for example Mansfield may lend to 85, while Marsden BS offers several deals with a term extending beyond 90, depending on the individual,” Hollingworth said.
He added these deals were not overly expensive: “Marsden has a two-year fixed rate charging 2.79 per cent to 60 per cent loan-to-value, with a £998 fee.”
Family Building Society offers mortgages up to age 95, while challenger bank Aldermore has an over-55s deal that could run to 99.
“It offers a five-year fixed rate charging 3.68 per cent to 60 per cent LTV with a £999 fee,” he said.
Bath, Tipton & Coseley, and Vernon Building societies also target older borrowers, alongside Hodge. Hollingworth added: “But all these options still require the borrower to show adequate income.”
Dean Mirfin, spokesman at over-55s advisers Key Retirement, added: “Equity release is another option allowing you to roll up your interest repayments and pay them off with the capital when you die or go into care.”