Half of consumers willing to delay retirement to own their home outright

New research from PensionBee has found that for most adults, owning a home outright is considered more important than preserving their pension and is worth sacrificing retirement years to achieve.

PensionBee’s survey of 2,000 UK adults found that 45% cite outright home ownership as the most important factor for retirement security, compared to 36% who prioritise a large pension pot. When forced to choose, 51% said they would delay retirement to own their home outright. Just 9% would opt to retire earlier if it meant renting in later life.

The findings come as a major report from the Pensions Policy Institute in July, commissioned by the ABI, warns that the UK pension system was built around a dwindling assumption that most people will enter retirement with no housing costs because they own their home outright. Almost two million more pensioner households are projected to be renting by 2044.

Renting a two-bedroom home through retirement costs between £200,000 and £400,000, yet median private pension wealth for those aged 60 to 64 is around £154,000. The average UK house price now stands at £270,000, rising to £553,000 in London. For many first-time buyers, the scale of those figures makes the prospect of outright ownership before retirement feel increasingly remote. And yet they may pay the price for not owning outright later on in the form of far higher housing outgoings in retirement

The emotional stakes are high. New global research by Ipsos found that the UK ranks first in the world for viewing homeownership as a marker of a successful life, with 69% citing it as important, and 58% saying they would feel sad if they never owned their own home.

Britons have long prioritised homeownership as a route to financial security. But rising house prices and longer mortgage terms mean that for those who do manage to save a deposit, it is taking longer to get on the ladder as well as to fully pay off the home loan. In 2005, the average mortgage term for a first-time buyer was 25 years. By 2025 that had risen to 31 years, and half of all new first-time buyer mortgages now have terms over 30 years, up from a quarter 10 years ago. The consequence is that even for homeowners, retirement may arrive before the mortgage payments have ended.

Prospective first-time buyers are understandably keen to prioritise getting on the ladder, but may also be at risk of downgrading their retirement prospects in the process. The average first-time buyer is now 32, taking out a mortgage with an average term of 31 years. That means the typical homeowner clears their mortgage at 63, 3 years before State Pension age. For those on longer terms, which now account for half of all first-time buyer mortgages, retirement and mortgage payments could overlap. According to the FCA’s Financial Lives Survey, one in four (24%) mortgage holders aged 65+ had outstanding debt at least four times their household income.

When asked whether they would support a government scheme allowing pension savings to be accessed specifically to fund a first home purchase, 51% of those aged 25 to 34 said they would consider using it if it existed. PensionBee’s modelling shows that the opportunity cost of redirecting £20,000 from a pension at age 30 in this way could be over £120,000 in lost retirement savings by age 67. That is the costliest trade-off for the age group most likely to take it up, and the group least likely to understand the long-term consequences.

Just 19% of respondents feel very confident their pension will cover their housing costs in retirement. 37% are either not confident or have not thought about it at all.

The picture is challenging, but there are steps people can take. Starting pension contributions early, even small ones alongside mortgage saving, makes a significant difference over time: contributing consistently throughout your working life is far more effective than trying to catch up later.

Becky O’Connor, Head of Pensions at PensionBee, said “These findings reflect a housing crisis that has reshaped how a generation thinks about retirement. People prioritising homeownership over pension saving might be making a rational financial decision, as owning your home outright removes one of the biggest costs in retirement. 

“However, the problem is that rising house prices have made that goal significantly harder to reach, and the consequence for many will be that retirement starts later, or that they arrive at retirement still carrying housing costs they had hoped to have cleared. For many, the home ownership goal will continue to evade them and then the question will be can they boost their retirement savings by enough to cover the cost of renting.

“The difficulty of achieving the twin major life goals of home ownership and decent pension savings has never been so apparent and the prospect that a sizeable proportion of people will not manage to achieve both is something that policymakers cannot ignore.”