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Mortgage age

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An Aviva survey has found that 12.5 per cent of homeowners between 65 and 74 still have a mortgage.

This is not surprising as there will be a substantial minority of homeowners aged over 65 who can still afford a mortgage or have chosen to take out a lifetime mortgage with interest rolled up. Some people will have originally planned to repay their mortgage earlier, but circumstances conspired to cause a delay in repayment, whereas others will have taken the mortgage out in later life for a specific reason or reasons.

It will be sensible for the vast majority of people to plan to be mortgage-free by the time they retire, which then leaves them with more choices when they do retire, the age at which people actually retire has progressively become more variable. In some cases a later retirement is a monetary necessity and in others a lifestyle choice.

But either way, a substantial increase in average lifespans, plus actual and proposed legislative changes partly driven by this, in particular the age discrimination laws, mean that it is no longer appropriate for lenders to assume that people, whether retired or self-employed, will retire at 65, or indeed any other age.

Despite this, one consequence of the credit crunch is that many more lenders have now imposed an arbitrary maximum age by when a mortgage needs to be repaid, usually between 65 and 75.

Whenever lenders send an email advising of a lower maximum age by which a mortgage must be repaid or any other tightening of criteria, invariably these days it starts off with the magic words, “as a responsible lender”.

It is hard to draw any conclusion from this other than that lenders that preclude announcements with this form of words consider that until the criteria change they were lending irresponsibly, which seems a rather strange claim to make!

Recent research found that the requests of 80 per cent of employed people who asked their employer if they could continue working beyond
65 were granted.

Furthermore, a proposed UK law change to comply with the European Union discrimination directive is likely to mean that it will shortly be illegal for employers to force people in most jobs to retire at a specific age.

In addition it appears probable after the general election that the age at which the statutory retirement pension will be paid will be extended more rapidly than has already been set by the Government. Many self-employed people already choose to retire later than 65.

Like all other types of mortgage, the availability of lifetime mortgages has reduced since the credit crunch but we are nevertheless in the rather crazy situation, partly as a result of FSA concerns about mortgages into retirement, that although it is considered acceptable to lend to older
people provided they want to roll up the interest, most lenders will not lend beyond the age of 75 to someone who actually wants to pay the interest. How is this treating customers fairly?

Ray Boulger is senior technical manager at John Charcol

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