Borrowing on a mortgage later in life risks triggering a retirement debt crisis as homeowners struggle to meet repayments, staff at the Bank of England have warned.

Writing on the blog Bank Underground, analysts at Threadneedle Street warned that the increasing trend of people borrowing beyond the state pension age posed “risks which could build over time”, threatening to undermine the financial system if they persisted.

During the first three months of the year, the share of new mortgage lending extending beyond the state pension age of 67 surged to 42pc, according to Financial Conduct Authority data.

It marks a sharp rise from around a quarter before Covid, underscoring how spiralling house prices and stagnating incomes are pushing borrowers to take on ever-longer mortgages.

The blog post said: “Longer mortgage terms could affect financial stability by pushing debt repayments beyond retirement, where incomes are less certain. They allow borrowers to take on a higher level of debt relative to income and could cause greater debt persistence.”

The surge in ultra-long mortgages comes as affordability has become increasingly stretched for younger generations. Home ownership rates among those in their mid-20s to mid-30s have fallen by 20 percentage points since the turn of the millennium to 39pc.

Meanwhile, soaring rents and living costs have made it more difficult to save for a deposit, with nearly two thirds of first-time buyers in the past five years relying on the “bank of Mum and Dad”.

Ultra-long home loans are most popular among younger borrowers and first-time buyers, with the majority opting for a term of at least 30 years.  As a result, the share of borrowers on such terms has tripled since 2005.

Meanwhile, around 30pc of borrowers with new mortgages had a term of at least 35 years, the Bank staff’s research highlighted. This includes a tenth with terms of 40 years or more, in stark contrast to the average of 25 years.

The Bank’s staff blamed the shift on “rising interest rates, increased costs of living and higher house prices” contributing to less affordable mortgages.

They noted that in the short-term, borrowers’ finances were more secure as their monthly payments were lower – but there could be longer-term consequences for the economy.

However, they warned: “Retirement income is often lower or more uncertain. Continued borrowing into retirement could provide challenges for mortgagors to continue to meet payments.”

The analysts also warned that borrowers were left with fewer options if they found themselves in financial difficulties, as they would not be able to extend the term of their mortgage to lower payments. Borrowers would also take longer to pay back their mortgages, paying far more interest.

However, they said that tight lending criteria likely meant the overall risks to the financial system were limited.