Older borrowers want to see age limits on lending scrapped as the pension revolution highlights the need for new solutions to maximise retirement income, new research shows.
A nationwide study shows nearly two out of five over-55s (37%) believe there should be no maximum ages imposed by lenders while another 47% believe lenders should base decisions on borrowers’ ability to pay.
The research reveals strong demand for new borrowing solutions specifically aimed at the retired – two out of three over-55s would like to see regulated lenders offering loans and credit cards for the retired.
The report forecasts strong growth for equity release and other retirement lending solutions as part of a “seismic shift in the way people fund their retirement”.
Research shows there is strong potential demand to borrow in retirement – nearly two out of three (63%) of over-55s say they would welcome the ability to borrow.
Dave Harris, managing director at more 2 life, who carried out the research, said: “Pensioners and those in the run-up to retirement need flexibility and are entirely capable of making informed and sensible decisions as long as there are lenders willing to lend.
“Regulators have quite rightly focused on the need to stop irresponsible lending but that is having a chilling effect on lending to responsible borrowers and even those in their 40s as recent FOS rulings have shown.
“Retirement lending will be a growth area in the future as innovation in retirement income planning develops and it is one that the industry as a whole should be looking at now – one of the drivers for that growth will be the huge number of Interest Only Mortgages due to mature over the next 15 years or so where the borrower has no means of fully repaying their debt.”
Research shows 17% of over-65s expect to borrow or have already borrowed money in retirement. Figures from the FCA suggest there will be 40,000 Interest Only Mortgage maturing each year between 2017 and 2032 where the borrower is aged 65 or above.
A couple in their 40s became unusual victims of age discrimination after HSBC rejected a £250,000 mortgage application because it deemed the husband to be too old, earlier this year.
In the first case of its kind, the Financial Ombudsman Service found the lender guilty of being ‘unfair’.
HSBC was ordered to pay £500 to the couple for their ‘distress and inconvenience’ over the ‘unfair application of its age policy’, and was told to reconsider their loan application.
Bosses at the bank defended their decision and argued it was ‘entitled to apply a maximum age policy’, according to ombudsman documents seen by the newspaper.
But the Ombudsman said: ‘The bank relied on untested assumptions, stereotypes or generalisations in respect of age.’
Have you ever been refused a loan or mortgage due to your age? Have you found that lenders place more emphasis on age rather than income?
With the state pension age increasing and most of us having to or choosing to work longer this could become even more of an issue. Ed.