For years, mortgage lenders have been strict with their terms and conditions for mortgage lending, including their lending age limits. Currently, mortgage lenders want mortgages to be paid off by mid-70’s and are cautious about lending to people in their 60’s and beyond.
However with an aging population, no set retirement age, the rise in property prices and divorce rates rising, many people want the flexibility to be able to pay their mortgage until later in their lives. People are not buying houses until they are older due to lack of money and divorce means many people re-mortgage in their 40’s or 50’s adding more debt to their mortgage.
However, for a long time, it would have been very difficult for older people to get a mortgage even if they had good credit and were considered low risk financially. New research from the Building Societies Association (BSA) suggests that lenders are now starting to raise the maximum age of repayment to 80 and beyond.
To show how much the tides have turned around 30 building societies now seem to be willing to lend to borrowers up to or over the age of 80. For an ageing population, this is good news especially as the number of over 65’s is only set to grow over the next 20 years.
Adrian Anderson from broker Anderson Harris spoke to The Guardian about these changes; “The situation has been improving of late, with a number of larger banks and building societies increasing the age by which the mortgage has to be paid off,”
The Mortgage Market Review of 2014 required banks and building societies to be much more strict about who they lend to, restricting lending to those over a certain age and stopping pensioners from getting a mortgage. However it seems that all this is about to change as lenders begin to recognise that mortgages, like everything else, need to become more flexible.
The rethink of the terms and conditions of a mortgage shows that lenders are acknowledging the way that people pay for their homes now is not as straightforward as it once was. The Financial Conduct Authority (FCA) found that in 2014-15 there was a 3% rise in borrowers who will be over 65 when their mortgage finishes.
As lenders move their age limits from 65 to 80, 85 or no limit at all, it shows that existing customers and those re-mortgaging have more flexibility than ever. For some lenders, including Halifax, their condition for raising the age limit comes with a condition of providing proof of income for now and beyond.
Brian Murphy from the Mortgage Advice Bureau said; “Lenders are reviewing and raising their upper age limit because they recognise people no longer uniformly retire at 65 or 70… They also realise that some older borrowers have got pensions or other incomes that allow them to service mortgage payments well into retirement”
There should be no additional age related fees or premiums which comes as good news for older borrowers. Lenders are also being quick to calm any potential fears associated with borrowing later in life but there are still some issues that could occur.
The main concern from many is regarding income as you must be able to demonstrate that you will have a sufficient income when retired to pay for your mortgage. For larger lenders, it can be difficult to see past the formalities in place whereas smaller lenders take applications on a case by case basis, underwriting their own agreements to suit the borrower’s needs and situation; this is why so many smaller lenders are open to higher lending age limits.
There currently is no specific maximum age that has been placed on lenders to follow but most impose a maximum age of 70-75. This can be bad news for older people who want to re-mortgage and have the funds available but have been deemed too risky due to age. These new findings will change that and make the mortgage lending market fairer for all.
If you want to find out more about mortgages, get in touch with an independent financial advisor (IFA) as soon as possible to discuss your issues or queries.