View more on these topics

Retired deals for older borrowers

New criteria force pensioners out, writes Devraj Ray

Older borrowers are being forced to take out expensive equity release mortgages as mainstream lenders tighten their criteria for those who want to extend their loan into retirement, brokers warn.

Over the last month, Leeds Building Society, Skipton Building Society and Newcastle Building Society all cut the maximum age on their standard mortgage ranges from 80 to 75. In May West Bromwich Building Society cut its maximum age to 70 on its standard mortgage range.

Leeds has also pulled its entire ‘Lending into Retirement’ range of products, aimed at borrowers typically aged 60 and over, which had no maximum age limit. 

Leeds says it has decided to change its criteria for older borrowers after it used up the tranche of funding for its Lending into Retirement range. 

John Charcol senior technical director Ray Boulger says demand for mortgages in later life has always been there but the recent spate of changes in this sector reflects the need to ensure affordability under the mortgage market review. He says the fact several lenders are pulling out or tightening their retirement mortgage criteria puts those left in the market under greater pressue, creating a domino effect.

Boulger says: ”There are three ways lenders remaining in the market can approach the increased business flow from this sector. One is to tighten their criteria to restrict the business coming in, second would be to raise interest rates and the final option would be to pull out of the market altogether. It seems like most have either taken the easy final option, or are gearing up to do so.”

Trinity Financial product and communications manager Aaron Strutt says the changes are hurting older borrowers.

He says: “These changes from lenders are basically forcing older borrowers to take out more expensive equity release mortgages. I think lenders are pulling out because there are so few alternative options for them and more applications are coming in than the lenders want to receive.

“Speaking with some of the more regional building societies that are lending to older borrowers, they have been saying they are absolutely inundated with applications from older borrowers. One of the underwriters told me they can actually pick and choose from the applications they are receiving at the moment because of the sheer volume.”

Strutt adds:  “These older borrowers are stuck. For some people, the situation is really getting desperate. Every time a lender knocks five years off their maximum age it just makes it harder for a lot more people.”

There are still lenders in the retirement market with either higher maximum ages or no maximum at all. Mansfield Building Society lends to borrowers up to the age of 85 while National Counties and The Vernon Building Society have no limit on age. 

But these societies cannot cater to everyone, and the result seems to be that older borrowers are being pushed toward potentially more expensive equity release mortgages instead.

Age Partnership equity release technical manager Simon Chalk says there has been a direct correlation between more stringent lending criteria for older borrowers and an increased volume of equity release enquiries.

Chalk says:  “It is certainly true to say the equity release sector is the net beneficiary of providers in the mainstream market tightening up their criteria. 

“We are seeing more enquiries from people who are either in the position of wanting to repay an existing loan or simply wanting to borrow a bit of money, but are unable to demonstrate to the satisfaction of mainstream lenders that they are able to make their repayments. This increase in activity has been happening visibly over the last two to three years.” 

Recommended

Adam-Norris-2013-700.jpg

Hargreaves Lansdown investor eyes deals with £100m war chest

One of Hargreaves Lansdown’s biggest shareholders has amassed a £100m war chest to invest in retail financial services firms across the protection, at-retirement and alternative investment markets. Adam Norris, who set up Hargreaves’ pension and annuities arm Pensions Direct, is looking to take a stake of between 25 and 30 per cent in advice firms […]

Chris-Leslie-2012-700x450.jpg
1

Labour says mortgage fees could be ‘next big scandal’

Shadow Treasury financial secretary Chris Leslie says high mortgage fees could be the “next big scandal”.  Speaking at a fringe event at the Labour conference in Brighton today, Leslie said lenders should inform borrowers about the impact of rolled up mortgage fees every year and not just at the start of their term. Moneyfacts data […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. What world is this? Old age doesn’t suddenly appear. Everyone has plenty of time – – at least 30 years to realise that when the stop work they really shouldn’t have any debts at all – and that includes a mortgage. Is it stupidity or idleness when people get to retirement with debt?
    And may I point out that no one is forced into anything. I get two or three enquiries a year concerning Equity Release and on every occasion when I have produced a report and sat down with a client explaining what a poor deal these are, they have not proceeded.
    In the end it is a strange financial concept – called ‘Living within your means’.

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com