- Number of over-40s being blocked by mortgage lenders has risen
- More than a third of brokers expect the problem to worsen this year
- Comes as lenders promise to ease the rules for older borrowers
There has been a sharp rise in the number of over-40s who are struggling to get a mortgage or remortgage to another deal because of their age, brokers have warned.
Two in five brokers have reported a rise in people above this age struggling to be approved by lenders, according to a survey by Nottingham Building Society.
In a worrying trend, more than a third of brokers expect the number of over-40s having problems securing home loans will continue to rise this year.
Age block: Brokers are warning that many aged over 40 are being penalised by mortgage lenders
Age restrictions on mortgages have become a sticking point in recent years. According to Halifax, first-time buyers are taking their first step onto the property ladder at an average age of 31.
Most mortgage terms are between 25 and 30 years, meaning many could face paying off their mortgage at 56 or 61.
With lenders reluctant to lend into retirement, a first-time buyer aged 40 could find themselves struggling to get a 30-year mortgage.
Others who buy even later than this face still paying off their mortgage in retirement, something lenders are often not keen on approving.
In the past two years, 17 per cent of those who have been turned down for a mortgage or a remortgage say age has played a major factor. This rises to 21 per cent among those aged 45 to 54.
Around one in four of those whose age counted against them say they were not able to borrow for long enough while the rest were turned away because either they or their partner were too old.
Older borrowers are seen by some lenders as more risky because they will still have outstanding debt once they have stopped earning.
However many will have even more secure incomes than those in work, as they will have a guaranteed state pension as well as private pensions.
Some workers still benefit from final salary pensions, which provide a guaranteed retirement income for life. This is even more secure than a salary, which can stop in the case of redundancy or poor health.
Lenders also don’t necessarily take into account that people are working for longer and longer and many will not be giving up work completely just because they’ve reached retirement age. This trend is expected to continue as people’s life expectancy continues to rise.
Older borrowers wanting to borrow for terms that go beyond retirement age are often asked for evidence of their expected income.
One This is Money reader, who is in their 40s, was even asked for state pension forecast from a lender, which is only available to those aged over 55.
Mortgage lenders are working to ease the rules that count against older borrowers – the Council of Mortgage Lenders and Building Societies Association are both working with members to make it easier and some lenders have increased their maximum ages.
Meanwhile, Nationwide said today it will now use a borrower’s anticipated retirement age in its affordability check rather than using the state pension age, if this is lower.
Locking in early: It can get tougher to secure a mortgage beyond the age of forty or so, according to Nottingham Mortgage Services
Britain’s biggest building society said the maximum retirement allowed will remain at 70, while the mortgage term must end before the eldest applicant’s 75th birthday.
Ian Gibbons, senior mortgage broking manager at Nottingham Mortgage Services, said: ‘It is baffling for people in their early 40s to be told they are too old to have a mortgage and particularly so when the average age of first-time buyers is rising which means some could even be first-time buyers.
‘There is no doubt creditworthy customers are being rejected and some are facing restrictions on their choice of mortgages.
‘However there are options out there for older borrowers and the key to ensuring they get the most appropriate mortgage is to search the whole market. If your existing lender is restricted on what it can do there are other options.’
The research shows the main reason for being turned down for a mortgage or remortgage is a poor credit history – 38 per cent of those who were turned down say their credit record counted against them while 19 per cent were rejected on grounds of affordability.
MORTGAGE LENDING AGE CAPS
Most lenders will consider lending beyond a maximum age on a case-by-case basis.
The policies of the biggest lenders are:
Royal Bank of Scotland
Income will be assessed after age 65 up to age 70
Maximum age of 75
Lloyds Banking Group
Maximum lending age of 75 across Halifax, Lloyds TSB and Bank of Scotland
Maximum age of 75 for capital repayment and interest-only. Will consider extensions
Maximum age of 70, consideration will be given to extend the mortgage term beyond the maximum age, however evidence of how the applicant intends to repay the mortgage in retirement.
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