OAP Mortgages

by Mark Johnston

Many people are now being forced in to renting for much longer than intended due to job insecurity and a credit drought. As a result, more than a quarter of private tenants currently seeking to buy a property are now in their 40s.

A recent survey revealed that 27% of those who feel ‘trapped’ in the rental system are over the age of 40.

The survey by the property website Rightmove.com suggested that if people in this group are ever able to buy their own home they face paying off the mortgage over a shorter time period or becoming ‘OAP mortgagees’, who could still be paying off their mortgages in their 70s.

Would be home owners in their 40s could also face the prospects of facing difficulties in getting a 25 year mortgage if it takes them beyond lenders retirement age criteria.

Also according to Aviva, a major insurance company, one in five home owners over the age of 55 owe more than £62,000 on their mortgages and one in ten home owners over the age of 75 are still paying off a mortgage with an average outstanding debt of £78,000.

Most lenders do have an upper age limit on borrowing and this usually refers to the age at which the mortgage must be repaid, not at which borrowers can take out a new mortgage.

The financial service authority (FSA) has claimed that they are not to blame fro lenders restrictions on lending beyond retirement age. Shelia Nicoll, director of conduct policy at the FSA, says ‘lenders themselves have made the decision to impose age restrictions.

Many believe the regulator should not be blamed on the issue of lending in to retirement and Paul Smee, director general of the council of mortgage lenders (CML) suggests “there should be a more flexible approach to lending in to retirement in certain cases, but not a blanket policy to allow this type of lending”.

As we now live in a society were many live and work beyond retirement, we also it seems buy and pay off mortgages later in life.

In the 1980s the average age of a first time buyer was 26, by 2000 it was 30 and now in the current financial climate it looks to be around 40. With this in mind some lenders have changed their policies to adapt to the ageing population over the last couple of decades.

Neither the Halifax nor the HSBC have an upper age limit, but they do still have some restrictions.

Some lenders not only want those wanting to obtain a mortgage at 40 to provide proof of income but also verification of income beyond retirement age.

The HSBC points out that while it does not impose different lending criteria on older borrowers, it does have responsible lending principles, including having a regard for older customers mental faculties.

Northern Rock has also introduced more flexible rules on retirement lending; it will now take in to account employment income up to the age of 70 instead of its old limit old limit of 65.

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