The media have reported an increasing number of cases where older people are struggling to find mortgages. These are credit worthy borrowers who along with other groups such as the self employed or contract workers have become known as mortgage misfits.
Changes in mortgage regulation, called the Mortgage Market Review (MMR), introduced new rules on affordability. This requires all mortgage lenders to fully assess that every mortgage they provide is affordable. However, some lenders have decided to restrict mortgages for older people as they cannot fully establish if the mortgage is affordable in retirement. This is not just impacting those wanting a mortgage in their 50s or 60s, if you are aged 41 and want a 25 year mortgage a number of lenders may not accept you. Lenders with these restrictions generally will not permit a mortgage term that exceeds the age of 65.
ICM Unlimited conducted recent research in this area on behalf of Ipswich Building Society, this identified that 39% of mortgage holders were concerned about the availability of mortgages for older people. In fact of all the age groups 45% of the youngest group (20 – 29 years olds) said they were concerned about access to mortgages for older people.
A more significant issue was that 45% of respondents held concerns that as they got older they would end up paying more than younger people.
Why are some mortgage lenders refusing to offer mortgages to older people?
Lenders that have decided to limit their mortgage lending to people under the age of 65 state difficulties in confidently assessing their affordability. This often means that they cannot guarantee the retirement date or value of a mortgage applicant’s future pension. Whilst this may be difficult and not guaranteed, neither is a salaried occupation. What may appear to be a lack of common sense being applied is probably driven by these lenders using automated systems. These are incapable of handling situations that are not in their process flow or are based on a degree of likelihood, as opposed to 100% certainty. Furthermore, employees using these systems are restricted to only following the computers’ answers.
So what can you do if you need a mortgage for over 50s?
If you need a mortgage that goes beyond your 65th birthday then there are some mortgage lenders who will consider you. Smaller, regional building societies tend to specialise in this area of lending. They use people and not computers to make their lending decisions. This means they can assess mortgage applications individually and on their own merits. This is ideal for those with unusual incomes, pension income or unusual circumstances. This approach can be beneficial for those needing a mortgage for older people.
2 quick tips if you are looking for a mortgage into retirement
A quick call to ask the lender’s maximum lending age will help you determine if they will lend in your age bracket. You can watch this video to find out more about one lender’s retirement mortgage programme.
- If you’re not sure or would like help to find the right lender for you, a mortgage broker could be an idea. They may charge you a fee for their advice.