Nationwide’s move to increase its maximum age for mortgage maturity could see rivals follow their lead, according to several equity release experts.
Earlier today (9 May), the building society announced its decision to increase the age limit for mortgages from 75 to 85, giving it the highest age threshold of any high street lender.
Andrea Rozario, chief corporate officer at Bower Retirement Services, said following Nationwide’s move it was “very likely” high street banks would in the building society’s wake.
Ms Rozario suggested mainstream lenders are beginning to recognise the mortgage needs of older people, but said affordability will be the battleground.
“My concern would be with borrowers’ understanding of how future changes could still have an impact on their ability to afford a mortgage at that age, i.e. increasing costs of care.”
Niche lenders have already begun to act.
At the start of April, the Mansfield Building Society increased the maximum age on its two-year discounted rate by five years from 80 to 85. The Dudley Building Society completely removing upper age restrictions in January and Ipswich Building Society last year made products available to those in retirement and borrowers up to 85 years old at the time of their mortgage term ending.
Mike Taylor, the Mansfield’s product and marketing manager, said at the time: “We are clear we can extend the maximum age whilst being a responsible lender, because each case is individually assessed by an underwriter based on the applicant’s personal circumstances.”
In November, a report from the Building Societies Association committed the sector to reviewing maximum age policies, as more people expect to be paying off their mortgage into retirement.
Halifax research found a third of 18 to 45-year-olds expect to work beyond retirement age to pay off their mortgage, while more than half were concerned paying their mortgage will hamper their ability to save for retirement.
Alice Watson, product manager at Retirement Advantage Equity Release, said Nationwide’s decision is evidence of the demographic shift in the UK.
“The demand for products among people in their seventies and eighties is proven by the continued rise in popularity of equity release. It will be interesting to see if any more providers react to Nationwide’s move and increase the upper age limit on their products.”
However Total Mortgage Network adviser Danny Matthews raised concerns about current lenders “who are currently happy to lend to age 70 with no proof of retirement income”.
Unless they strengthen their lending into retirement policy, age limit increases are pointless, he said.
“However, I do think it is a great opportunity to help interest-only legacy customers to switch to repayment and make it affordable for them to pay off their mortgage.
“Advisers need to continue to be confident of a repayment method for those who retire at state age and to assess whether a ‘downsizing’ or ‘sale of property’ is realistic for them before the end of the term, if it runs past it,” added Mr Matthews.
peter.walker@ft.com
