The director of Craufurd Hale Wealth Management adds: “I have seen a lot of individuals in recent years who have mortgages to age 70 or 75, mainly because of affordability.
"The general view is that most individuals will have paid off their mortgages by state pension age or earlier. I have seen individuals borrowing more money and to make it work they extend the term.
"I have met with clients who have mortgages and are retired, they have an income need and therefore want to look at alternative strategies such as equity release to free up their income.
“We shouldn’t expect when giving advice that individuals will have paid off their mortgage. A key part of providing advice and planning is that we should be discussing everything in detail when meeting with clients.
“It simply comes down to holistic planning and asking questions to the individual. The adviser community generally is focused on assets under management and when sitting down with a young couple or a middle-aged couple, these types of questions need to be asked. Cash flow modelling should be done.”
Raghwani adds it is that IFAs discuss affordability when planning for retirement so that their clients were not shocked by the reality of later life.
He says: “This is why planning is so important, to discuss issues such as affordability when retiring, plans for the future are discussed so the client doesn’t get a shock. Most individuals do not appreciate their income levels will fall when they retire.
“Challenges are trying to help clients understand today, if they will not be in a position to buy their own home, then they need to make provisions now by saving and investing funds into Isas or pensions, to ensure they have the income to cover rent costs in the future.
"Clients need to understand that state benefits will not cover this type of shortfall. Education is really key.”
Potential pitfalls
However, more people renting in retirement should not automatically be viewed as negative.
Interestingly, Kusal Ariyawansa, chartered wealth manager at Appleton Gerrard Private Wealth Management, says owning a home might not make financial sense for some.
He says: “The very British tradition of wanting to own your own home might not make financial sense after all. Historically, price rises and low interest rates made home-buying a must, yet the landscape has changed. We're unlikely to see property growth like in the 1970s to 1990s.
"Higher interest rates, transaction costs and other expenses mean the actual growth might be less than what you get through buying shares in companies. In Switzerland and Germany more than half the population rent and there is no shame because it makes financial sense.
