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The news that borrowers in their forties are struggling to get a mortgage on the grounds of age has ruffled a few feathers in the press this week. Mid-life mortgage ageism is on the rise and, according to a survey by Nottingham Building Society, more than a third of brokers expect this alarming trend to continue. In spite of several recent rulings by the Financial Ombudsman Service (FOS) against lenders accused of age discrimination, lending past retirement remains a contentious issue in the industry.
The Mortgage Market Review (MMR) of 2014 placed a huge emphasis on thorough affordability checks. Lenders have become more risk-averse, and increasingly geared towards a ‘tick box’ approach; borrowers who do not conform to a vanilla profile often find themselves being excluded. This attitude poses particular challenges for the older borrower. Many lenders reduced their maximum age limits to 70, reluctant to lend to a borrower who would still have outstanding debt when their earning stopped. With terms generally spanning 20 to 30 years, it becomes easier to see why borrowers are now struggling to get a mortgage – even if they haven’t yet hit 50.
All this means borrowers in their 40s are being asked for evidence of their expected income at 70. According to NBS’s research, 17% of those turned down for a mortgage over the last two years say it was down to their age. This rises to 21% in the 45-54 age bracket.
Such rigid criteria fail to take into account that people are now working for longer – in some cases well past 70. Many don’t give up work completely when they retire – and some benefit from a final salary pension. In other words, retirement does not necessarily mean a total loss of earnings; in some cases, it means a period of stable and considerable income. Older borrowers often have assets that make the loan sensible and affordable for both parties.
There are signs of this restrictive attitude and approach is changing, and regulators are becoming aware of the problem. The Co-op recently had to pay £2,000 in compensation after the FOS ruled against them in a case of age discrimination, and lenders are taking certain steps to make life easier for borrowers. Some have increased their maximum age limits, and some are using the borrower’s anticipated retirement age rather than the state pension age in their affordability calculations.
“Having a mortgage application rejected is incredibly frustrating,” says Islay Robinson, CEO of Enness Private Clients, “especially if you are a perfectly credible – and creditworthy – borrower. We don’t believe that your age should be the be-all and end-all of your application. The good news is that there are options out there; you just need to find those lenders who are willing to have a conversation.”
Enness has a huge amount of experience in this sector. Last summer, we were featured in the Telegraph after sourcing finance for an 88-year-old, and we are always happy to speak to ‘non-conformist’ borrowers who are struggling to get a mortgage – especially if the problem is your age. If you have any questions, please do get in touch.