MortgagesNov 24 2015

Fos uncovers lenders using blanket age restrictions

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Fos uncovers lenders using blanket age restrictions

In a new report issued today (24 November) the Financial Ombudsman Service has found when assessing mortgage applications, some lenders have not been considering individual affordability and have instead applied blanket age restrictions.

The report, entitled ‘Just a number? Age, complaints and the Ombudsman’ stated that when assessing mortgage applications, lenders will also carry out a risk assessment.

It said: “But, because of the nature of the product, this is usually based on people’s individual financial position rather than broader data about their age group.

“But in some cases we looked into, we found that lenders weren’t considering individual affordability and were instead applying blanket age restrictions. This is something that the law allows lenders to do.”

It added that just as with insurance, where the age restriction is informed by a risk assessment relating to age, the risk assessment must be based on relevant evidence from a reliable source.

A Council of Mortgage Lenders spokesperson said: “The CML is currently working with our members to address the issues raised around retirement borrowing.

“We are working at an industry level and have commissioned research and policy reports on the subject. We also support initiatives including the Money Advice Service and the financial services vulnerability taskforce to help create engagement and discussion within the sector.

“We welcome this report and will take its findings into consideration as we continue our on-going work on this important issue.”

Paul Broadhead, head of mortgage policy at the Building Societies Association, said: “For many building societies the maximum age limit is, in practice, used as a guide and for a number there is an exceptions policy that enables applications to be looked at on a case by case basis.

“Age is one of a number of factors that lenders will consider when carrying out the underwriting of a mortgage application and, as the ombudsman recognises, the main consideration is the affordability of the loan.

“Lending to borrowers beyond, say, the age of 70 is not necessarily deemed too risky but the risks a lender needs to consider are different. Lenders will utilise a range of data from different sources when determining their lending policy and keep this under regular review.”

In October this year, it was found that nearly one in 10 young women who have applied for a mortgage in the last 10 years say they were discriminated against by lenders on the basis that they were pregnant or intending to start a family.

Research conducted on behalf of uSwitch by Censuswide in September among 2,002 women aged 25 to 45-years-old who have applied for a mortgage in the last five to 10 years.

The poll found that a quarter intentionally hid their family plans from lenders.

Following the Mortgage Market Review in April 2014 and the introduction of stricter mortgage eligibility criteria, lenders may refuse to grant a mortgage if they believe an applicant is unable to meet the repayments due to an expected drop in income.