However, by paying off your mortgage for longer, you risk having to pay down the loan later in life and reduce the amount you can save into your pensions in your 50s and 60s, warns Sir Steve.
“Historically someone might have paid off their mortgage in their late 50s and then they have cash to top up their pension each month,” he says. “Well that period doesn’t exist any more because you are paying a mortgage up to retirement. So be careful.”
Don’t count on an inheritance
One factor that could improve the situation for some is receiving a lump sum through inheritance, allowing them to pay down a mortgage or even get on the housing ladder.
For those born in the 1970s, the average age of receiving an inheritance is expected to be 62, meaning that some renters may be able to purchase a home outright later in life, according to the Institute for Fiscal Studies.
However, it is hard to predict the impact generational wealth will have across the country, says Brain.
“Our view is that policymakers and families can’t depend on inheritance to solve this problem.”
Pensioners relying on benefits
There is also the question of benefits in later life. As many as 400,000 more households could become dependent upon income-related pensioner benefits by 2041, according to the PPI. And an increase in those renting in later life will likely result in a higher reliance on housing benefit, the IFS says.
The think-tank estimates that spending on state pensions and other benefits for retirees could rise by £100bn a year by 2070.
Retirees currently benefit from the triple lock – a guarantee that the state pension will increase every April by the highest of wages, prices or 2.65pc. However, there is no guarantee of how long the policy will be in place and the pension age is set to keep increasing to 2050 meaning many will have to wait longer to receive the pay out.
A spokesman for the Department for Work and Pensions claimed the Government’s reforms would boost the average earner’s pension by 50pc.
He said: “Automatic enrolment has already helped an extra 11 million people save for their futures, and our plans to expand this, alongside our transformative Mansion House reforms, could help see the average earner’s pension increase by nearly 50pc when saving over a career, while a minimum wage worker could see their pension pot increase by nearly 90pc.
“We are also investing £30bn in housing support this year, and we are committed to creating a fair housing system that works for everyone by boosting availability of new, genuinely affordable housing.”
