by Mark Johnston
Too Old to Get a Mortgage!
It seems that record numbers of people in Britain are now carrying on working after the age of 65.
According to recent figures from the Office of National Statistics (ONS), people aged over 65 in employment in the first quarter of this year have reached 980,000.
However, banks and building societies are still of the belief that ‘financial life’ ends soon after a person reaches 60.
Before the financial crisis few lenders had restrictions on lending in to retirement but after credit crunch there are now concerns about lending in to retirement and beyond.
Mainstream lenders have in recent times restricted their criteria so much that many older home owners find they can not extend their mortgage terms. Similarly home owners who apply for a new mainstream mortgage are frequently being declined due to their age.
Lending to anyone over 65 is viewed as risky and unprofitable, not to mention a potential PR disaster as the media would have a field day if a lender repossessed the home of a pensioner.
Current figures from MGM Advantage, a retirement specialist, reveal that one in eight pensioners still have a mortgage to pay off of at least £50,000.
This therefore means that millions of elderly people are now being left with little or no access to the products they may need in order to get on with their lives comfortably.
West Bromwich building society has recently cut the maximum age that a borrower can be at the end of their mortgage term from 80 to 70.
A spokesperson from the West Bromwich building society stated “the society has to take an all round responsible approach to lending”.
This lack of financial options for elderly people is forcing more and more of them in the direction of equity release loans.
Equity release loans tend to be a more costly form of borrowing. Data from Moneyfacts, a leading personal finance data provider, shows that the current average rate for an equity release loan is around 6.3 per cent.
Although there are still options available for borrowers approaching UK retirement age.
If a borrower is either approaching or have already retired they will need to prove they have sufficient income to repay their mortgage.
Mortgage providers are mostly likely to want to see evidence of regular income from pensions, investments and insurance policies.
David Hollingworth, of mortgage broker London and Country, says “customers who wish to borrow past 75 generally have to pay a premium”.
For example: Leeds building society offers the over 75s a 2 year fixed rate mortgage but the rate is 4.49 per cent and the borrower needs at least 30 per cent or more equity in their property. By contrast someone younger with a 25 per cent deposit would be offered a rate of 2.53 per cent with the same lender.
Paul Green, of Saga, a specialist company who offers products and services for the over 50s, insists “many people are perfectly capable of servicing a mortgage well in to later life”.
Story link - Too Old to Get a Mortgage!
Related stories to : Too Old to Get a Mortgage!