John Charcol senior technical manager Ray Boulger is calling on the FSA to be less prescriptive over lenders grant- ing a mortgage to borrowers where the loan extends past the state pension.
In a consultation paper published last June, the regulator said lenders should consider an applicant’s ability to repay at the outset of the mortgage by predicting future income.
Boulger says it should not be up to the FSA to make assumptions about when people will retire.
He says: “This whole question of lending into retirement is fraught with difficulty because what is retirement? Who is to say what age someone is going to retire? I do not think it is up to the FSA to assume people will retire at 65 or any other age. Even before the current law change, people did not automatically retire at 65 anyway.”
Boulger admits it is more favourable for borrowers to be debt-free by the time they retire but says some people work past 65. He says: “It makes sense for borrowers to aim to repay their mortgage by the time they plan to retire but the key question is when they plan to retire. That might not be the state retirement age.”
Chadney Bulgin mortgage partner Jonathan Clarke says: “If there is a proper advice process in place, it should be down to the discretion of the lender but the FSA are trying to regulate it by force.”
An FSA spokesman says: “We believe it is important that a lender must ensure that a mortgage is affordable when it runs into a person’s retirement. This does not necessarily mean that a mortgage should not be able to run into a person’s retirement.”