Are mortgages for the over 60s and mortgages for pensioners a thing of the past?
Mortgages for over 60s and mortgages for older people are becoming increasingly harder to obtain.
Following the introduction of the Mortgage Market Review (MMR) some lenders have started to apply strict age limits on their mortgage lending. Some mortgage lenders have placed a maximum age of 65 for when a mortgage term has to end. This issue whilst probably having greatest impact on those aged over 50 also impacts younger borrowers, for example if you are aged 41 and wish to take out a 25 year mortgage you could be caught. In fact a recent case saw the Financial Ombudsman Service claim that one bank had been ‘unfair’ to an applicant in their forties who had been refused a mortgage on the basis it went beyond the age of 65.
The media has been talking about mortgage misfits since the launch of MMR in 2014, but this topic has become of increasing relevance for those looking for a mortgage for over 50s in recent months. A recent survey conducted by ICM Unlimited on behalf of Ipswich Building Society identified that 39% of individuals are concerned about the availability of mortgage lending for older people. In fact 45% of 20 – 29 year olds shared this concern.
So why have some lenders responded in this way?
Under the new rules all mortgage lenders are required to check the mortgage is affordable for the borrower. This is a good thing and aims to prevent excessive or unaffordable borrowing. However some lenders have decided that those looking for a mortgage that continues into retirement may not be able to evidence that it is affordable. For example, calculating future retirement income and setting a retirement date when you are still in your forties can be difficult. There are also concerns that for a joint mortgage where one partner is the main pension earner that the mortgage would become unaffordable should they leave the relationship or pass away. Whilst these concerns are legitimate, just because something is ‘harder to do’ should not be a reason for excluding credit worthy borrowers from the mortgage market, likewise, concerns over affordability for a joint mortgage applies at all ages not just when you are retired.
Are there options for mortgages for older people?
Luckily yes. Not all lenders take the same approach. Generally larger high street lenders find it harder to deal with applications for those wanting a mortgage in retirement. This is because they use highly automated systems that lack the flexibility to meet the needs of those looking for retirement mortgages. Smaller regional lenders, such as building societies generally use something called manual underwriting. This means they use a human being and not a computer to assess every mortgage application they receive. This means they can take a more pragmatic approach to their mortgage lending which is very useful for those looking for mortgages for over 60s. These lenders will gladly welcome those with good pension incomes, believing these to be as if not more reliable than a salary which can easily be lost or reduced in tough economic times!