MortgagesNov 25 2015

Older borrowers rejected outright by banks

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Older borrowers rejected outright by banks

Older borrowers are being routinely rejected by all the UK’s major high street banks when applying for new mortgages, irrespective of either their ability to repay through a pension or other regular income or the sale of their property, according to analysis by National Counties Building Society.

The firm made personal enquiries this autumn, approaching HSBC, Barclays, Lloyds, Santander, Nationwide and Virgin Money, using three scenarios: older borrowers; those still in employment; and those in retirement.

In all cases, National Counties claims the requests were automatically rejected on the basis of the age, before any detailed examination of the borrower’s financial circumstances.

Further discussions revealed that the banks would only say ‘yes’ if the mortgage was paid off in full before the borrower reached 75 or, in the case of Barclays, only as low as 70.

Keith Barber, director of business development at National Counties, explained that in most cases, retirement income, particularly when it is in the form of occupational pension schemes, is more secure than the earnings of a salaried employee, which is subject to the uncertainties of the workplace market and may be faced with redundancy before a mortgage term ends.

“In an age where we are living longer it does not seem right that people are being discriminated against in this way,” he stated.

“Maybe it is about time that lenders embraced the spirit of the Equality Act and cater for older borrowers’ needs. If not, a voluntary code of conduct should be created and implemented by members of the Council of Mortgage Lenders.”

In September, the CML’s chairman called upon mortgage providers must do more to serve older borrowers and think more creatively. Moray McDonald stated: “Innovation must come from mainstream lenders, because most consumers will still go to their bank,” he added.

Responding to the National Counties research, a spokesperson from HSBC said that they offer mortgages to customers where the term of the loan extends beyond the customer’s 75th birthday and these are referred for manual underwriting.

“Enquiries from customers whose mortgage requirements extend beyond this age are asked to provide evidence of how they will afford repayments for the loan’s full term.”

Barclays stated that it is working closely with the CML on the retirement borrowing working group and that their policy is that the mortgage must be repaid by the age of 70, or the customers’ retirement date; whichever is sooner.

“The reason we placed the boundary at 70 is because we have an obligation to lend responsibly. We will lend beyond the age of 70 for the oldest borrower, if there is a younger borrower who can cover affordability on their income alone.

“We limit our maximum age to 70 as otherwise we would be lending in the knowledge that many of our customers would face financial difficulty towards the end of their term,” continued the spokesperson.

“The same is true if we look at retirement dates – so if a customer retires at 68 for instance then in general we see that after this time their propensity to default increases greatly and so the responsible thing to do is limit our lending in these cases.”

Virgin Money responded that they look to support customers with their mortgage requirements wherever possible within a set risk appetite, including an appropriate assessment of affordability.

“We keep our policies under regular review, including for lending into retirement as the market develops.”

The UK already has 11.6m people over the age of 65. By 2034 it is estimated that around a quarter of the population will be aged over 65.

Earlier this month, the Building Societies Association committed to review maximum age limits on mortgages, as one way to better support those needing loan finance into and in retirement.

The BSA’s head of mortgage policy Paul Broadhead, said that as the average age of a first-time buyer continues to increase, borrowing into retirement is becoming increasingly commonplace, rather than a niche form of lending.

“The time is right to review lending policies, examine how advice is provided and to work closely with a range of organisations across different sectors to ensure that lenders are equipped with the appropriate tools to respond to the rapidly changing demographics across the UK.”

Meanwhile, the Financial Conduct Authority’s director of retail supervision and authorisations Jonathan Davidson warned that as the number of people aged over 80 is set to more than double in the next 25 years, there is an increasing demand for a broader range of products to meet these changing needs.

“We’re keen to support innovation in this area. It is as much an opportunity as a challenge,” he added.

peter.walker@ft.com