We all tend to think that first time buyers have the hardest job persuading lenders that they are a good risk when it comes to a mortgage but are banks and building societies equally reluctant to lend to older applicants? This seems counter-intuitive as older borrowers are likely to be more used to handling their finances and budgeting properly but it seems it is now harder moving house as you get older so what could be making lenders reluctant when it comes to older borrowers.
Many banks and building societies have made their lending criteria more stringent for borrowers approaching retirement age and some have even started to put a “maximum age” cap on their mortgage deals. This has resulted in some older borrowers struggling to secure a large mortgage for their new home, even when they have solid financial circumstances and a range of assets that more than cover the value of the mortgage. It has also led to accusations of ageism on the part of some lenders due to the restrictions they have placed on older borrowers that take little account of individual situations.
For instance, it is very common that older people will choose to down-size to a home that is easier to manage; one that is more adaptable to their changing needs as they get older and possibly less mobile. These types of homes, most usually bungalows, are not necessarily cheaper than standard 2 storey houses but are desirable because they allow people to remain in their own homes as long as possible. The No Place Like Home report from the Live-In Care Hub has revealed that a whopping 97% of older people would rather stay in their own homes than move into a residential care home. With the right sort of home (one adaptable to limited mobility) they will have the option of live-in homecare instead.
Yet some building societies reduced their maximum age limit from 80 years old to 75 while others have imposed age limits when previously they had none. Banks that traditionally did not have any age limit have slowly been reducing the limit so that in some cases it is set at 70 years old.
Reducing the maximum age allowable for mortgages has a significant effect on millions of borrowers because once they reach their fifties the age caps on the maximum age of a mortgage effectively shortens the maximum lending term. This in turn makes monthly repayments higher for these older borrowers and potentially less easy to manage. Since the majority of banks and building societies now only offer repayment mortgages, borrowers are obliged to take loans over a shorter period with payments much higher than they might have been used to or expected.
If you are planning on moving house but are struggling to find a lender to suit your requirements it may be worth talking to a specialist broker who knows which lenders are prepared to be more flexible. These may be lenders that are not well know like the typical high street lenders but they can be more prepared to look at an individual’s personal circumstances and take those into account when making a decision on whether to lend or not and on what basis.
This can be well worth doing given that some banks have reduced their maximum age limit to as low as 65 in recent months. Given that with our healthier lifestyles many people work far beyond this age (indeed the standard retirement age for someone in their 50’s now has already gone up to 68) it makes sense to maximise a mortgage term in line with an expected retirement age.
Fortunately some lenders are prepared to take a more holistic view when it comes to long term lending and a good mortgage broker will know which lenders have either a high maximum age limit or no age limit at all so it really can pay to take professional, unbiased advice rather than just go to your local mainstream bank or building society.