Over a third of new mortgages being taken out today will extend beyond the borrower’s 65th birthday, but less than 1 per cent of all new lending - including equity release - was to this group, data from the Council of Mortgage Lenders revealed.
The new figures were revealed at a conference last week focusing on the issue of ‘pension tension’, helping to crystallise the distinction between borrowing into retirement, and borrowing by customers in retirement.
The former is a much larger phenomenon, according to the CML, with lengthening mortgage terms and the older age at which some buyers are entering the property market meaning that almost 35 per cent of new loans are not expected to be fully repaid until the borrower has passed the nominal retirement age of 65.
However, most of these will be paid off shortly afterwards. Around 80 per cent of mortgages extending past the borrower’s 65th birthday are due to be repaid before the customer turns 70.
In contrast, borrowing in retirement occurs on a much smaller scale and has been in decline since 2007, apart from a small increase last year attributed to strong growth in lifetime lending.
The value of mortgages (excluding lifetime mortgages) taken out by borrowers aged over 65 declined to around £1bn last year – accounting for only 0.5 per cent of total annual advances of more than £203bn.
Over 50s group Saga pointed out that many older homeowners are still being blocked from accessing more competitive mortgage deals. Indeed, in April, the Financial Ombudsman Service upheld a customer complaint after HSBC refused to give a mortgage on the grounds that the consumer would have been over 65 at the time of the term end.
A Saga spokesperson said: “Whilst a lucky few may have been able to take out a mortgage to move home at an older age, we’re still hearing from people who are stuck in uncompetitive mortgages who are unable to move to a better deal simply because of an arbitrary age limit,” read a statement.
“Financial institutions need to change. Lending decisions should not be based on somebody celebrating a birthday; it should be about an individual’s ability to pay.”
Speaking to FTAdviser recently, CML director general Paul Smee said that one of their ‘work streams’ this year is concerned with borrowing into old age, which is related to the tougher approach of banks post-Mortgage Market Review.
He added that there is an “interesting dynamic” between residential lenders and equity release providers, who “must work together” in the future to ensure older borrowers are catered for adequately.
peter.walker@ft.com
