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Should Lenders Review Maximum Age Criteria?

January 13th, 2016

Pressure is building on lenders to review their maximum age limits after two firms this week loosened their criteria on lending into retirement.

Following the mortgage market review in 2014 many lenders request proof of retirement income if taking the mortgage past retirement age and will use this income to assess affordability in what is deemed as higher risk lending.

However this week two building societies relaxed their criteria, encouraging calls for other lenders to follow suit.

Darlington Building Society raised its limit meaning borrowers must now repay their loans before their 85th birthday when this was previously set at 75 as long as the mortgage is on a capital and interest repayment basis.

Following suit Dudley Building Society removed restrictions across its products. The firm previously had a cut-off age of 75.

Mark McBurney, Senior Mortgage and Protection Consultant at Contractor Mortgages Made Easy said, “Lenders have acknowledged the need to address the growing contractor market but have been slow to react to the ageing population. Few offer flexibility to contractors and freelancers taking their mortgage past their state retirement age when in reality they ultimately decide when they will retire.”

The growing market of contractors and freelancers emphasises the need for more flexibility to borrow into retirement. Approximately 1.23 million people were working as full or part time contractors towards the end of 2015 according to research by specialist lender Kensington Mortgages. This number is only expected to rise in 2016 due to changing attitudes to employment.

Mark McBurney adds, “Contractor friendly lenders we work with such as Metro Bank and Clydesdale Bank offer the flexibility of taking the mortgage up to a maximum age of 70 and 75 respectively without proof of retirement income, however each case is discussed with underwriters upfront and is assessed on its merits.

“Given the recent changes with other lenders relaxing their maximum age criteria, larger lenders should feel pressure to review their own criteria.”

Further pressure will be felt following Britain’s building society sector pledging to review maximum age limits for borrowers. The Building Societies Association (BSA) emphasised the ageing population and estimates by 2034 roughly a quarter of the population will be over 65.

They say that house prices, student loans, divorce rates and the end of a default retirement age all mean that consumers are buying houses later in life and repaying for longer.

Darlington chief executive Colin Fyfe says that his firm made the decision due to the belief that the ability to repay should not be based purely on age.

He says: “I think that affordability as a principle is stronger than just some generic guides that don’t really tell you anything about the individual or their life circumstances.”

Article By: Bradley George, Senior Mortgage Consultant at Contractor Mortgages Made Easy

Media Contact: Ratchelle Deary, Public Relations Manager

Tel: 01489 555 080

Email: ratchelle.deary@contractormortgagesuk.com

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