Pressure is building on lenders to review their maximum age limits after two firms this week loosened their lending into retirement criteria.
Prior to the Mortgage Market Review many lenders tightened their criteria when lending to borrowers whose loans extend beyond retirement or those wishing to borrower post-retirement.
While many of the big lenders require borrowers to have paid off their loans by age 75, smaller lenders – building societies in particular – are sometimes more flexible when it comes to lending to older people.
This week two building societies relaxed their criteria, promoting calls for others to follow suit.
Darlington BS raised its limit for those borrowing on a capital and interest repayment basis. This means borrowers must now repay their loans before their 85th birthday as opposed to 75 previously.
Today Dudley BS removed all such restrictions across its product range on Thursday. Previously the firm had a cut-off age of 75.
Darlington chief executive Colin Fyfe says that his firm made the decision because he believes the ability to repay should not be based purely on age.
He says: “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.
“We felt there is a need, there is a justification, and as long as we are tailoring any mortgage to the individual and their circumstances, we can lend justifiably to 85 years of age.”
Dudley head of credit Jonathan Moore says the society made the change as it believes “cases from older borrowers offer no more risk than younger ones”.
He adds: “We consider all borrowers to be equally worthy of consideration, and by making our entire range available, we will demonstrate that we do not discriminate by age.
The broker community says lenders should concentrate on affordability and not “arbitrary age limits”.
Legal & General Mortgage Club director Jeremy Duncombe says that many lending limits do not reflect modern lifespans and lifestyle choices.
He says: “What lenders should be looking at affordability and the ability to pay for that borrower and make their decision on that, not on an arbitrary upper age limit.”
Your Mortgage Decisions director Dominic Lipnicki says that lenders have been slow to react to the ageing population.
He says: “In reality, in my view, there should not be an upper age limit. It’s all about affordability and being sensible.”
The Council of Mortgage Lenders, which has launched a working group to look at lending into retirement, says: “The issues and challenges associated with retirement borrowing are complex, and are often inter-linked with other decision for older people: about pension provision, their changing accommodation needs and the need for care, and how wealth acquired over a lifetime may be drawn upon to fund a range of lifestyle choices, in the right circumstances.
“Their differing circumstances mean that options, choices and solutions will not be the same for all older people. We therefore recognise a need to work with individual lenders, as well as consumer groups, pension providers, financial advisers, housing providers, think tanks, other trade bodies, regulators and government as we try to make progress in this area.”