Lenders allowing people to have mortgages in later life is far from a new phenomenon.
While the Mortgage Market Review resulted in some lenders restricted lending to borrowers where the term took them past the age of 65, some continued to allow loans into later life.
Dale Jannels, managing director of All Types of Mortgages, says his business has had relationships with a number of lenders, especially building societies, that have allowed unlimited maximum age for mortgages for some time.
What is new is high street lenders are hitting the press headlines now as they know how many people are coming to the end of ‘normal retirement age’, but who are carrying on working and still have a large debt to repay.
Mr Jannels says: “If the loan-to-value is good and affordability fits, people are working longer, living longer and therefore should be able to have a mortgage for longer if required.”
Paul Winter, chief executive of the Ipswich Building Society, says before launching his retirement mortgage programme the lender conducted research which found on average one in five (18 per cent) people expect to be still paying off their mortgage in retirement.
A third (33 per cent) of those polled told Ipswich they were concerned about the availability of mortgage products in the future when they are older, while just over a third (35 per cent) believed they would end up paying a higher mortgage rate in the future as a result of their age.
Mr Winter says it is in response to the changing needs of borrowers, that many lenders are joining Ipswich and beginning to increase the maximum age limit on mortgage.
But Martin Reynolds, chief executive of SimplyBiz Mortgages, says another reason why lenders are increasing the maximum age limit on mortgages is increased pressure from government/regulators for fairness in lending to older clients.
He says this pressure, combined with a realisation that some pension income is still secure and has not been washed away with pension freedom, is what has prompted some lenders to increase the maximum age limit now.
Mr Reynolds says: “Given that the maximum retirement ages were removed a few years ago, there is no ‘cut off’ and there is an increase in life expectancy, hence the likelihood that an individual will live to the end of the loan term (average life expectancy is more than 85 for both genders).
“There is an increasing pressure on all elements of society regarding the funding of house purchase and the resultant pressure on those in older age groups to release equity from their home to help younger age groups.”
Charlie Blagbrough, mortgage policy officer of the Building Societies Association, agrees there are a whole range of reasons why lenders are increasing the maximum age limit on mortgages now.