Older mortgage borrowers find pressure easing as lenders relax age rules

29 January 2019

Borrowers who still need a mortgage in retirement have more options as lenders increase the maximum age on loans.

Borrowing became particularly difficult for older people in the wake of the 2008 financial crisis.

In order to manage risks, mortgage lenders tightened the lending criteria by reducing the availability of interest-only loans and lowering the maximum age at the end of the term.

However, the number of mortgages that allow borrowers to reach the age of 80-84 at the end of the term has increased from zero in 2014 to 1,078 today, according to research from Moneyfacts.

Similarly, the number of deals that require a borrower to be aged between 65 and 69 when their mortgage ends has dropped from 923 in 2014 to just 18 today.

Darren Cook, finance expert at Moneyfacts, says: “Over the past five years, mortgage providers have become far more accommodating to borrowers who wish, or may have no alternative but to extend their mortgage term well past the official pension age. 

"The scaling back of strict criteria around the maximum age at the end of a mortgage must be a welcome relief for those borrowers who may have reached the end of their mortgage at 65 on an interest-only mortgage and have had few options available to turn to.

“The softening of the maximum mortgage end age appears to be widespread: In February 2014, 52% of all available mortgages were permitted to mature when the borrower was 75 years old and over, whereas today, this figure stands at 72%. 

"The scrapping of the default retirement age in 2011 now means that the official pension age and retirement age are no longer one and the same and employees can choose to work beyond the pension age for reasons other than financial need.

"Reasons to extend a mortgage past pension age may include releasing cash from their equity or purchasing a retirement property."

Amongst the big high street lenders Halifax will lend up to age 80 while Nationwide Building Society will go as high as 85.

However, some of the smaller lenders in the market will have a more flexible approach, assessing applications on a case by case basis.

Family Building Society, Hodge and Aldermore will all lend into a borrower’s 90s for example.

In addition to lenders relaxing lending criteria, David Hollingworth, associate director at London & Country Mortgages, also says that new products are being launched to address the needs of this growing market.

He says: "This improvement in choice for customers who have adequate income to ensure the mortgage will remain affordable is further added to with the introduction of retirement interest only mortgages( RIO). 

"RIO mortgages still need the borrower to evidence they can afford monthly payments but removes the need for a formal end date at all with the mortgage repayable on sale, death or after moving into long term care.

"For those that can’t take on a monthly payment there of course remains the option of equity release where a lifetime mortgage carries no monthly payment but instead the interest rolls up."

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