In theory, older borrowers should be wiser, more used to managing a home loan and more experienced at budgeting for their monthly mortgage repayments. So, why are banks and building societies so reluctant to agree large mortgages for older applicants?
Over the last few years many lenders have tightened their criteria for borrowers approaching retirement and two major lenders have recently reduced the ‘maximum age’ on their mortgage products. We look at why older borrowers are struggling to obtain high value mortgages and why some experts believe lenders to be increasingly ‘ageist’ when it comes to agreeing deals.
The Daily Telegraph reports that over the past month, three building societies have reduced their age caps on mortgage lending. Leeds Building Society has reduced its maximum age to 75 from 80 – following the Skipton’s lead – while Newcastle Building Society has introduced a cap at age 75 whereas it previously had no limit.
The newspaper reports that ‘historically, high street lenders have issued loans without setting a maximum age for the borrower. But banks have slowly tightened their lending criteria since the 2008 financial crisis, and now typically refuse borrowing past age 70 or 75.’
Reducing the maximum age for high value mortgages has a significant effect on millions of borrowers as Islay Robinson, CEO of London mortgage broker Enness Private Clients, explains. He says: “Once borrowers hit their fifties or over, caps on the maximum age of a home loan reduces their maximum lending term. With most lenders insisting on a repayment mortgage, borrowers are being forced to take loans over a shorter number of years and finding their payments are much higher than before.
“As well as restricting the age on home loans many lenders no longer offer ‘interest only’ options. This means that any older borrower looking to remortgage will find that their payments may be a lot more than they expected,” he adds.
Many of the High Street lenders you’re likely to encounter enforce a strict maximum age of 75 and Halifax, Nationwide, Lloyds, Santander, the Co-Operative Bank and the Chelsea Building Society all have this limit. Some even have a lower cap – First Direct, Yorkshire Bank, Kensington and Clydesdale Bank all enforce a maximum age of 65. So, if you’re struggling to find a lender that will agree your mortgage past age 65 or 70 then it can pay to speak to a broker for advice.
“There are some lenders who are prepared to take a more holistic view,” adds Mr Robinson, the London mortgage advisor and large mortgage specialist. “For example, some lenders including Bank of Ireland, the Bath and Monmouthshire building societies and HSBC have no maximum age limit.
“If you want a better deal on your mortgage but you’re currently on an interest only deal and are in your fifties or older, seeking professional advice can help. Most lenders you’ll approach will insist on a repayment loan to age 75 and this may result in payments that are simply unaffordable to you. However, there are other options and a professional advisor can help,” he adds.