Posted: 26th January
Property lending: call for Building Societies to make mortgages more accessible for older people
Is there about to be a change in property lending for older borrowers? Building societies are being urged to review the maximum age limits for mortgage borrowers, due to an increase in over-65s applicants and growing demand for longer mortgage terms.
This is one of the recommendations contained in an interim report entitled Lending into Retirement from the Building Societies Association (BSA) – which represents all 44 UK building societies.
According to the report, there are 11.6 million people over the age of 65 in the UK. By 2034, it’s estimated that a quarter of the population will be 65+.
Calls have intensified for lenders to do more to help older borrowers amid claims that they are being frozen out of the market, either because they are already retired, or will be when their mortgage term expires.
The current market
In the current market, most mortgage lenders will only grant a mortgage up to an individual’s planned retirement date, so for someone aged 45 who plans to retire at 67, the maximum mortgage term might be just 22 years. This has led to many older borrowers either being turned down or restricted to a more costly, shorter mortgage term.
But the old model where people bought a home in their youth and paid it off before they retired is gone. Additional factors such as rising house prices and an increase in the number of people working past their state pension age means that people are buying homes later in life and need longer repayment terms.
The call for change follows criticism by Lord Newby for failing to act in the “spirit” of the mortgage market review (MMR), which took effect in April 2014. The act prompted lenders to relax their affordability rules. However, little has changed since then. The large banks have tough rules on lending into retirement, and most lenders still refuse to grant mortgages that go past the borrower’s planned retirement date.
Building societies are more flexible with their terms, and will often lend to the 85+ market. Bath building society does not event have a set maximum age, but looks instead for proof of continued income.
As the average age of a first-time buyer continues to rise, borrowing into retirement is becoming increasingly commonplace, rather than a niche form of lending.
The time is right to review lending policies, examine how advice is provided and to work closely with a range of organisations across different sectors to ensure that lenders are equipped with the appropriate tools to respond to the rapidly changing demographics across the UK.