It is no secret that in today’s economy, mortgage seekers of all ages and incomes are finding it tough to find a lender that will meet their needs, or indeed, will lend any money to them at all.
The current mortgage industry requires large deposits and airtight affordability checks before sending out the all-important mortgage offer.
Now consider those of us in our 50s seeking to re-mortgage, and we can see that things are getting even more difficult. Many banks and building societies have put an age cap on their lending criteria, meaning they’ll point-blank refuse a mortgage for those over a certain age.
The common age is 75, but some have even stricter criteria. Remember that this age restriction is not just for the age the applicants are when they apply, it is the age limit for the entire length of the mortgage.
A 51 year old will not be able to obtain a 25 year term mortgage if the lender has an age restriction in place of 75. This is only the first hurdle to climb.
Since April 2014, the Financial Conduct Authority, who governs the mortgage market in the United Kingdom, issued strict guidelines on affordability. This meant that lenders are responsible for ensuring that their customers can afford mortgage repayments at the time of taking out the mortgage and for the entire length of the mortgages life. They were told to particularly plan for foreseeable events, such as retirement.
This means that an applicant working full time at age 55 will have to prove to the bank that they will be earning enough after retirement to be able to pay back mortgage repayments.
To make it worse, a lot of lenders do not take into consideration pension income as “suitable” income for their affordability checks. What does this mean? Well in short, it means that you’ll be refused a mortgage.
This matters more as a sizable number of us are coming to the end of interest only mortgages and find it increasingly difficult to extend the length of the term, or even find a replacement mortgage. Essentially forcing us to sell up and downsize, if downsizing is even an option. Those on the bottom rung of the housing ladder may be forced off it entirely.
But now, not everything is quite so bleak, as the mortgage industry has spotted this large gap in the market, and certain sectors are eager to help those that are struggling to find funding from the high street banks.
The at-retirement sector, that has until recently been dominated by Equity Release products, such as lifetime mortgages and home reversion plans, have begun to market mortgages that are more akin with the high street’s traditional mortgages.
Lifetime mortgages that offer the ability to make interest payments are to all intents and purposes identical to their high-street counterparts, but with added safeguards and unfortunately a higher interest rate to go along with it. Traditional mortgages are available too, that have no age limit, and do take into consideration pension income.
The problem is accessing these mortgages, and even finding out that they exist. The at-retirement sector has always been a niche market that is ignored by the majority of mortgage brokers, and therefore the average broker may not be aware or be able to offer them.
Prejudice against the Equity Release sector stemming from unregulated activity in the 80s has also meant that people are afraid to enquire about these avenues.
The Equity Release Information Centre can provide information and advice on a variety of options that are open to those of us in our 50s.
If you want information on the options available to you, or if you have found it difficult obtaining a mortgage due to your age, give them a call on 0800 077 6885 or visit their website at www.AskERIC.tv.
This is a lifetime mortgage or home reversion plan. To understand the features and risks ask for a personalised illustration. Your home is at risk if you do not keep up repayments on a mortgage or other loan secured upon it.
