Mortgage Blog: Rule change puts mortgages out of reach for older applicants

Posted 1 August 2014

As it has become more and more difficult for first time buyers to get onto the property ladder, the average age of house buyers has risen. More and more people are taking out a mortgage at an older age, meaning that they will still be paying back their home loan as they approach retirement age.

Now, changes to policy from two of the UK's biggest lenders means that it has become even harder for older borrowers to get a mortgage. Halifax and Nationwide have introduced new rules for borrowers who want to take their mortgage into retirement, even if they have a substantial deposit and good income.

Halifax and Nationwide have introduced new rules for customers who want to borrow past the normal retirement age. The subtle but important rule change means that they now determine the point of retirement as a customer's anticipated retirement age or their state pension age, whichever is the lower. For most people this will be the state pension age which is currently 65 for men and around 62 for women. This means that borrowers now have to prove their income in retirement, even if they plan to work past the state retirement age.

The change has not only affected borrowers in their 50s and 60s but also younger customers who want to take a 25 or 30 year mortgage into their late 60s or early 70s - even where they intend to work until that age.

Nationwide has also introduced a requirement for borrowers who want their loan to run into retirement to have an occupational, stakeholder or personal pension, regardless of their other savings or assets.

For example, if you are aged 45, you intend to retire at age 70 and you want to take a new mortgage over 25 years, Nationwide will refuse the loan if you are not paying into a pension, even if your income is enough to cover the mortgage and you have a large deposit.

Keith Osborne, editor of new homes portal WhatHouse?, said: "Many experts expect the average age of a first time buyer in the UK to reach around 40 by 2025. If lenders are still insisting that mortgages are repaid by a borrower's 70th or 75th birthday - as most do now - then people simply won't be able to get a loan. This is despite people living and working for longer."

 

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