Is the housing crisis jeopardising my retirement prospects?

Katie Royals is concerned that the current housing crisis is jeopardising her retirement prospects and those of other first-time buyers. Here’s why.

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The current housing crisis means more people are renting for longer, and often at higher prices. In many cases, this is pushing money away from pensions. Something that is very much on my mind at the moment is whether the housing crisis is jeopardising my retirement prospects. If you’re in the same boat, read on to find out what the current cost of housing could mean for your retirement.


My story

I’m in my mid-twenties, so it may seem a bit odd that I’m concerned about jeopardising my retirement prospects already. However, when looking at how long it might take me to save for my first home, I can’t help but think about it.

At the moment, the vast majority of my savings and investments are earmarked for a house deposit. The longer it takes me to buy a house – and it could still be three or four years – the longer it will take for me to be able to start putting money aside for retirement.

Moreover, getting a mortgage is not easy. After calculating how much I can borrow, I realised that I may well need more than a 10% deposit to be able to afford to buy a property.

Mortgage terms are usually at least 30 years. It is perfectly possible I will still be making mortgage repayments in retirement, meaning I’ll need a larger sum to be able to live comfortably.


The stats

According to Hargreaves Lansdown’s Savings and Resilience Barometer, renters are far less likely than homeowners to be on track to have a moderate income in retirement.

A moderate retirement income is defined by the Pension and Lifetime Savings Association as £20,800 per year for a single person and £30,600 per year for a couple.

The research found 56.4% of Gen Z homeowners were on track to achieve this, compared with just 15.5% of renters. This pattern is repeated for Gen X, where 52.2% of homeowners are on course, but just 17% of renters are.

For baby boomers – who are approaching retirement themselves – just 13.3% of renters have saved enough for a comfortable retirement.

What the experts think

“Renters have a huge looming pension problem and risk sleepwalking into a retirement crisis,” warns Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown.

The cost of getting on the housing ladder has increased hugely. This has a significant impact on individuals’ financial planning and risks ruining a lot of peoples’ retirements.

Helen goes on, “Those who don’t manage to get on the housing ladder need to find the money to keep paying their rent throughout their retirement years. This is a significant extra cost to account for in an already stretched budget.” 

It’s not just getting enough money together for a deposit that’s an issue. Mortgages risk derailing peoples’ retirement plans too.

The chances of reaching retirement mortgage free are decreasing rapidly for most. People are buying later in life. It’s not unusual for first-time buyers to be in their mid to late 30s now.

At the same time, mortgage terms are increasing to make them more affordable. This means people are repaying their debts for longer, putting more financial pressure on them later in life.

“Increasingly, we will enter retirement with outstanding mortgage debt that needs to be repaid. This all puts extra pressure on our retirement planning,” Helen adds.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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