Mortgages  

It's not just first-time buyers who are underserved

Leon Diamond

Leon Diamond

With house prices continuing to rise alongside the ongoing cost of living crisis, it is no surprise that certain portions of the market are struggling more than ever to access lending.

Last week, FTAdviser reported that first-time buyers are underserved by the UK’s mortgage market thanks to a lack of housing supply, the tightening of lending criteria, and property prices far out-pacing a first-time buyer’s typical income.

But unfortunately, it’s not just this end of the market that is struggling under the current circumstances. Ageism in financial services is seeing over 50s sorely underserved too.

Here is what’s happening – and how we can try to address the problem.

Older borrowers face ageism from financial services

A rising number of people are finding that once they hit middle-age they are routinely turned away by High Street lenders when seeking a mortgage.

The problem? Short-sighted affordability criteria.

Since many High Street lenders don’t fully understand the over 50s market, many offer mortgage products with lending criteria that are simply not fit for purpose when it comes to meeting the needs of mature borrowers.

In practice this might look like an upper age limit – after which point applicants are no longer considered eligible – or it might mean limitations in affordability assessments.

For instance, many mainstream lenders judge how much an individual can afford to borrow based solely on salary payouts, meaning they are unlikely to recognise income derived from pensions, investments, or rental.

A growing number of mortgage prisoners

The possible implications of not being able to access lending are wide-reaching, particularly in today's inflationary environment. 

Research conducted by LiveMore suggests that more than 30 per cent of people over the age of 50 are on a standard variable rate mortgage, due to the shortage of willing lenders or appropriate products.

It means that these borrowers are particularly susceptible to interest rate rises, which the Bank of England looks set to continue increasing in its bid to manage surging inflation.

According to data from Moneyfacts, those on SVRs are typically paying a rate of about 4.61 per cent, compared to 2.03 per cent for those on an average two-year fixed-rate mortgage.

Finding solutions for the over 50s

As for the solution, until lenders begin thinking more flexibly about their lending criteria, those in later life are going to continue to find themselves short on options when it comes to remortgaging, or taking out a new mortgage.

What do I mean by thinking flexibly? 

I mean affordability criteria that goes beyond a one-size-fits-all approach, which looks beyond salary to recognise a potential borrower’s entire financial portfolio. 

And once they’ve managed to pass a lender’s affordability assessment, those in middle-age and later life need more mortgage products available to them, too.

It’s no use jumping through hoops to get accepted for a mortgage only to discover you’re trapped on an interest rate that isn’t going to meet your lifestyle needs.

For instance, in today’s environment in particular, it's really important that over 50s are able to have the peace of mind that comes with fixing their mortgage rates for more than five years.