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If you are retired, close to retirement, or even if you want a mortgage whose term will end after you retire, then you may find that your borrowing options are somewhat limited. However, do not give up just because the high street lenders seem unwilling to help. (‘HSBC rebuked by the Financial Ombudsman Service for age discrimination’.)
Traditionally banks and building societies have been reluctant to lend to older borrowers, who have been viewed as risky and unprofitable. In the years leading up to 2008, lenders were beginning to recognise that, with people living and working for longer, offering mortgages to individuals later in life could be worthwhile. They started to make their lending criteria more flexible to meet the increasing demand. However, following the credit crisis, lenders’ own risk aversion to borrowers with variable incomes and changing circumstances, combined with strict new lending guidelines laid down by the Mortgage Market Review (MMR) have meant that the majority of banks have not wanted to lend outside some fairly narrow parameters. Some banks will restrict lending up to the age of 65, despite the fact that this conflicts with the official government age for retirement at 67. Others will lend to older borrowers but will insist on having proof of sustained pension income.
However, there are a handful of building societies such as the Harpenden that will lend right up to the age of 75 if the applicant is able to declare their intention to continue working. Encouragingly, here at Private Finance we have recently been able to process a case under specialist terms for a gentleman who was 82 years of age, due to the size of his pension income. And we were featured in an article on older borrowers in the Daily Telegraph, having arranged a 12 month loan for a 92 year old who wanted to move to a smaller property without selling her existing home immediately.
We have noticed many people have been marginalised by the MMR; older borrowers among them. The challenge for older borrowers in particular is that they need to demonstrate affordability past the age of 65, though, because much of this is linked to the size of their pension when they come to retirement age, it can be fairly difficult to predict.
Other groups that have been most affected include contract workers and the self employed. One of the greatest challenges for the self employed for example is demonstrating their ability to generate in income in retirement if they work, for example, in a physical job such as building, personal training or anything requiring a steady hand, such as medical surgery or being an airline pilot. One case we handled recently was a gentleman with an income of more than £150k and a Harley Street medical practice but as his work involved carrying out surgery the lender would not justify the loan due to the fact that surgeons are not permitted to continue working in this capacity beyond the age of retirement. Fortunately, we were able to look for alternative ways to present his level of affordability to get the case approved.
If you are an older borrower who is looking for a substantial mortgage that will run past the normal retirement age, we recommend you take independent specialist advice from a broker who is used to regularly arranging such mortgages with specialist lenders, many of whom you will not find on the High Street or outside their regional base. It is likely to save you time and money and mean that you can afford to buy or remortgage your property, whatever your age.
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