Buy-to-let age limits are being relaxed and ‘endless’ mortgages could even be a thing of the future, as lenders begin to revise their maximum age requirements in light of recent pensions reforms.
During FTAdviser’s live panel debate on the Mortgage Market Review today (11 September), one reader asked about the possibility of endless buy-to-let products, bemoaning time limits which give rise to forced sale, capital gains tax and potential inheritance issues.
Panelist Robert Barnard, head of business development at Aldermore, responded that there have already been moves in this direction with some lenders removing the maximum age at expiry of a buy-to-let mortgage and edging instead towards a maximum age at inception.
“With recent changes to pension rules we may see more movement in this area,” he added.
Fellow panel member David Hollingworth, head of communications at London and Country Mortgages, added that more lenders will look to revise their maximum age as more older borrowers use buy to let to generate retirement income.
“Endless may be some way off though,” he added.
The debate was centred on the Mortgage Market Review and the issues advisers are facing in terms of interactions with lenders and their own due diligence.
One reader broached the issue of what advisers need to do in proving that a mortgage transaction is legitimately ‘execution-only’ under MMR.
Lynda Blackwell, mortgages and mutuals sector manager at the Financial Conduct Authority, explained that there is no requirement for lenders to check an intermediary sale, although the regulator expects lenders to monitor execution-only business and have anti-fraud measures in place.
“We require advisers to maintain details of these controls to ensure that, where the sale is interactive, only high net worth consumers, mortgage professionals and business borrowers are able to buy a mortgage on an execution-only basis without first getting advice.”
She added that to get a mortgage on an execution-only basis, the customer needs to know all the details what they want so that the adviser can simply give effect to that.
Ms Blackwell continued: “The adviser also has to explain to the customer clearly and prominently in a durable medium the implications of making their own decision about the product they want, and the customer must confirm in writing that they are aware of this.”
Mr Hollingworth commented that execution-only is “destined for the online market”, where self-selection by the client is possible without any interaction with an adviser.
He said: “Our experience of online transactions has been that clients will often find the need to raise a question at some point in the process, seeking comfort that they are doing the right thing.”
Elsewhere a user asked whether personal pensions contributions should be considered as ongoing committments and thus factored into affordability assessments when assessing mortgage applications for high earners.
Ms Blackwell said there is no requirement under the MMR for them to be factored in.
She said: “They are not committed expenditure because the borrower has the ability to flex those payments and could, for example, reduce the amount they pay into their pension for a period, prioritising instead their mortgage payments.”
Mr Hollingworth agreed, adding that it seemed unfair to penalise a borrower saving diligently for retirement, versus someone that saves very little.
“Where the mortgage term will run beyond retirement there is much more justification for treating contributions as an ongoing commitment, as there is a clear need to continue to build the pension pot.”
