Mortgage age limits set to rise

It is wonderful that most of us are living longer. By 2034 it is estimated that around a quarter of the population will be aged over 65. Society is therefore changing but is the financial services industry offering the right products to meet our changing needs?

Recent regulatory changes on affordability has caused some First Charge Mortgage lenders not to offer mortgages to borrowers with repayment dates beyond the age of 75. This age has come down! Yet borrowing into retirement is becoming increasingly common.

The government is keen to help first-time home buyers, who are being forced to buy much later in life than they would wish. But there is much less thought given to the fact that older first-time buyers will need mortgages with longer repayment terms – so they will have a mortgage much later in life and possibly into retirement.

There is clearly an increasing demand for a broader range of financial products to meet the needs of an ageing population. The home is seen partly as a pension but equity release products should not be seen as the only answer for income and potentially the social care costs of older homeowners.

The Building Societies Association (BSA) has launched a report called “Lending into retirement” in November 2015 and has committed to review the maximum age policies on mortgages. But other industries will have to adapt also. Older homeowners need more suitable housing options.

Government policy needs to treat housing wealth in a more rational and consistent way. Innovative financial products must be encouraged. The insurance industry needs to play a bigger role in mitigating risks to lenders.

Holistic financial planning in retirement should be more widely available. Ideally, mortgages should be able to adapt to the different stages of a person’s life.

The Second Charge mortgage industry is leading the way with lending to borrowers age 75 as standard but with age 80 increasingly common. A Second Charge Mortgage can continue after the First Charge Mortgage has been repaid. So it will surprise many to learn that Secured Loans offer valuable age-related flexibility and have already begun to address the borrowings needs of an ageing population.

You can look at the BSA report here