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Fairer Mortgages for older people

Mortgages

Fairer Mortgages for older people

Further to our blog in October in which we reported that an investigation was being held into achieving fairer mortgages for older people comes news this week that every building society in Britain is set to review its age limits in what the Sunday Times hails as a “victory for its campaign against unfair treatment for older borrowers”

October blog

The Sunday Times reported on 8th November that it had received an advance copy of the report prepared by the Building Societies Association (BSA) which recommended several action points as follows:-

  1. A commitment that all members of the Association would “urgently reassess the maximum age for borrowers”.
  2. The Association to form a cross industry alliance with other bodies (including government and regulators) to meet regularly to discuss mortgage lending to older people.
  3. Mutual building societies to work with insurers to develop policies that enable lenders to mitigate risks relating to lending to older borrowers
  4. A range of mortgage options to be developed for older borrowers looking to “down size” or “right size” to a property better suited to their needs in later life.
  5. A consumer guide aimed at older people to be published providing information on age restrictions, inheritance, pension freedoms, powers of attorney and equity release.

In its conclusion the Report states “The mortgage market must adapt to the needs of an aging population”. The fact is that the number of elderly people is set to increase significantly. Figures from the Office for National Statistics (ONS) reveal that the number of people aged over 65 is expected to jump from 11.4m in 2014 to 17.2m in 2035. Unless action is taken urgently then the mortgage and related financial needs of this significant age group will just not be met.

mortgages for older people

The current situation

The Sunday Times Play Fair with Age campaign launched a year ago highlighted the following main reasons why people are currently trapped by what it describes as “the age issue”.

  1. Because many building societies and banks will not lend beyond a customer’s 65th birthday a fit and healthy 55 year old for example will be refused a mortgage term of longer than 10 years. Even though more and more people (over 1.1 million according to the ONS) work beyond their 65th birthday the current rules too often preclude them from being able to continue to repay their mortgage beyond that age.
  2. Although it did not specifically mention age limits the Financial Conduct Authority’s Mortgage Market Review in 2014 which insisted that lenders check that potential borrowers could genuinely afford a loan resulted in many lenders bringing down the maximum borrowing age from 80 to 65 (or in some cases 70) irrespective of the applicants ability to repay the loan beyond that date.
  3. Many lenders refuse to consider pension income when assessing whether or not a borrower can afford a mortgage.
  4. Many lenders are inflexible and will not even allow older applicants to make an appointment to discuss a possible loan. (In July the Financial Ombudsman Service reprimanded a bank for cancelling the appointment of a lady mortgage applicant solely because she was aged over 65; earlier the HSBC had been reprimanded for telling a couple in their 40s that they were too old to take out an 18 year term mortgage because the husband would have been over age 65 by the time the loan was paid off.).

Implementing Change

The BSA Report is a very helpful start point but it is just the beginning of what is likely to be a long road in achieving an environment which is genuinely fair for the older borrower. There does however appear to be a genuine recognition that change must be achieved and that building societies and banks must be more innovative in creating products which suit the need of the older borrower. For too many existing borrowers the only current option is that of equity release which most people see as an unwelcome “last resort”.

Peter Broadhead, head of mortgage policy at the BSA hopes that progress will have been made on reviewing age caps “within 12 months” and if that is the case then millions of older people can look forward to being significantly better off.

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  • Tony Watts

    Just hit this roadblock myself – ironically as I spend my voluntary time chairing an organisation giving older people a voice in Government. I’m 63 and was carrying a large mortgage (£93k) due to end at 70. An inheritance has allowed us to move to a more expensive house and reduce our mortgage to £30k over a shorter period. You’d think the Building Soc would be delighted – but no. I have to demonstrate I can keep paying mortgage past 65 from pensions income alone. “But I’m self employed, with no intentions of retiring.” “You’ll still have to get past our underwriters.” Outrageous. And this is a building soc bailed out by the British people.