Mortgage Lenders Increase Age Limits: Good News for Older Borrowers?
4 minute read
Challenger bank Aldermore recently announced that people can now hold one of its mortgages until the age of 99, while increasing the maximum age for new borrowers to 85. It’s the latest of several lenders to push the upper age limits on their mortgages to cater for older borrowers. The Family Building Society, for example, also increased its maximum age at the end of a mortgage term to 95.
The reasons for this can be found in changing demographics, lifestyles and social norms. Thirty years ago, most people got their foot on the property ladder at a relatively young age, and typically took out a mortgage for a 25-year term. Today, young people are increasingly saddled with student debt and, due to high house prices, may spend many years scraping to save a deposit on their first home. These factors, alongside the fact that couples are now having children later, mean that people are buying their first home much later than in previous generations, and often opting for terms longer than the traditional 25 years.
Lenders have traditionally been reluctant to lend to older borrowers. Mortgage rules set down by the Financial Conduct Authority (FCA) mean that lenders have a responsibility to be sure that borrowers will be able to afford the repayments throughout the entire term of the mortgage, including into retirement. For many people, retirement often means a reduction in income. For that reason, mortgage lending to older customers is riskier, and often involves confirmation of current pension value and expected retirement income.
There are a number of scenarios in which an older person might want to take out a mortgage. In addition to moving home, mortgage-free homeowners may want to raise equity on their property, either to supplement their retirement income or to help out children or grandchildren. Some older borrowers with an interest-only mortgage that’s close to the end of the term but without a means to repay it are also now in the position of needing to find a way to repay that mortgage and stay in the property.
Mortgages for Older Borrowers
Several mortgage options are available to older borrowers, depending on their age and circumstances. Subject to the lender’s age limits and sufficient income, a straightforward repayment mortgage over a fixed term might be available. For other homeowners, equity release plans can provide either a lump sum or regular income, allowing the borrower to remain in their home until they die or go into care, with the loan and accrued interest repaid on the sale of the property. A recent FCA rule change has also led to a much wider range of retirement interest-only mortgages becoming available on the market.
Of course, older people applying for a mortgage will be subject to similar assessments as any other mortgage customer. Lack of income may be an issue on some types of products, while age may still be a factor in the type of mortgage you can get and what term you can take it over. It’s also important to consider all the implications of taking on a mortgage later in life; for example, what happens if a couple borrows based on two pension incomes but one partner subsequently dies?
It’s difficult to predict whether this trend of mortgages for older borrowers will continue, but at Just Mortgage Brokers, we believe this will represent a growing segment of the mortgage market over the coming years, as people work longer, live longer and may need to supplement income or raise a lump sum later in life. If you are considering taking out a mortgage, remortgage, equity release plan or retirement interest-only mortgage, give us a call today. We have years of experience in helping people of all ages secure lending, and we look forward to helping you find the lender and deal that’s right for you.