10 Aug 2016
Author: Stephen Breen
Historically, the availability of good mortgage deals for the over sixties have been poor. But as lenders wake up to the fact that we’re living longer, older borrowers are seeing more options on the market.
In 1980, the average life expectancy in the UK was 73.68 years. By 2012, this had increased to 81.5 years. The fact that we are living longer than ever before can be put down to a number of reasons, according to research officer George Holley-Moore of the International Longevity Centre. These include improvements in healthcare and treatments for diseases such as heart disease and cancer, improved nutrition and better housing conditions. Historical factors also play a part – for example, there was a large increase in births after the First World War which has given us a bigger pool of people to live into their nineties than was the case in previous years.
With people living longer, lenders have recognised a large potential market and have started to respond. There are 44 building societies in the UK and of these, 13 have scrapped their age limits for mortgage applications, choosing instead to consider applications on their individual merits. A further 10 building societies will lend to applicants up to the age of 85, and six will lend up to the age of 80.
The Mortgage Market Review: harsh restrictions
Many of the problems that older borrowers have experienced came after the Mortgage Market Review (MMR) which was launched in 2012 by the Financial Services Authority. The FSA wanted to introduce responsible lending but the result was that lenders were effectively discriminating against borrowers purely on the basis of their age.
It was not just the over-sixties experiencing rejection – some borrowers in their forties found that obtaining a mortgage was difficult on the basis of their age. This led to the Times launching a ‘Fair Play on Age’ campaign in 2014.
Peter Day and the Financial Ombudsman
Lenders’ ageist policies came under the spotlight in January 2016 when the Financial Ombudsman reviewed an application to extend a mortgage by borrower Peter Day that had been rejected by The Co-operative Bank. The Bank turned down Day’s request to extend the mortgage by five years, purely on the basis of his age which was 59 at the time. Day complained and this was upheld by the Ombudsman Service who overruled the Co-op’s decision. The Bank were also ordered to pay all Day’s fees and £500 compensation for his “trouble and upset”.
This decision is likely to be significant for borrowers struggling to obtain finance in later years.
The best options for older borrowers
Older borrowers will find building societies typically offer the most flexible lending criteria. Building Societies frequently consider applications on a case-by-case basis rather than using an automatic rejection system.
Building Societies that have no upper age limit include:
Bath, Buckinghamshire, Cambridge, Cumberland, Dudley, Harpenden, Leek United, Loughborough, Monmouthshire, National Counties and Vernon.
Building Societies that will lend up to the age of 85 include:
Beverley, Darlington, Earl Shilton, Ipswich, Mansfield, Market Harborough, Marsden, Nationwide, Penrith and Stafford Railway.
Building Societies that will lend up to the age of 80 include:
Ecology, Furness, Hanley Economic, Holmesdale, Melton Mowbray and Teachers (Source: Building Societies Association).
On the high street, the HSBC’s age limit is 75, the Royal Bank of Scotland’s limit is 70 and Barclays is 70 or retirement age. However, these lenders will consider applications on a case-by-case basis.
Note that if you have an interest-only mortgage, you have a better chance of re-mortgaging with a building society than you do with a high street lender.
The Building Societies Association publishes a helpful guide, ‘Can I get a mortgage at my age?’.