en 65 and 74 still having a
maximum arbitrary age?
month: Should lenders impose a maximum age limit?
The short answer to this, in my humble opinion, is no. With work patterns changing dramatically as the population ages, many of the traditional rules seem a little anachronistic and need to be updated. The baby boomers are the first generation to really benefit
from advances in preventative medical science and are therefore able to work longer.
Couple this with the fact that many jobs are service orientated or desk based and there is no reason to suggest that people are less able to do a job at 65 than 35 if they so choose.
In fact, as pension funding issues become more
apparent, many more people will find themselves working longer.
Age, therefore, should no longer be a barrier to borrowing. It is, as always, affordability that is key. As long as there is an income in place it should tie in initially with the client’s own anticipated retirement age.
If the term is to go past this then evidence of anticipated pension income is taken into account. It should equally not be the case that applicants are offered mortgages up to the age of 65 if, for example, they have said that they intend to retire at 55, unless of course anticipated pension income is sufficient after that time. There are, however, various concerns around the reality of an anticipated retirement age, as well as potential issues regarding the more elderly persons state of mind, so the question therefore is whether there is actually a level where it is prudent not to lend beyond?
What lenders most want to avoid is the damaging situation
from a PR point of view of having to turf an elderly borrower out of their property. However, if sensible underwriting is adhered to in each case, together with a “reality check” around the type of work done and retirement age carried out, then many
Andrew Montlake,
director, Coreco
potential issues could be avoided.
How old is old? Not only are more people reaching 65, they’re living well beyond it. Medical advances in the UK, coupled with improved working and living conditions, are leading to an ageing population. In just twenty five years to 2008, the numbers of people of pensionable age rose by 1.5 million. Demographic forecasts point to the percentage numbers rising rapidly upwards, with the over 65s making up to 23% of the population, from the current 16%, by 2033. House prices too mirror these strong numbers, with average costs rising almost six fold over a similar 25 year period, from £30,000 to over £180,000. It’s this combination that means for many mortgage lenders
and brokers, the traditional view of old age is having to change. The normal practice that lenders will want mortgage loans repaid by normal retirement age is being tested. While some ageing borrowers are working longer, it’s clear that with the past sustained house price increases to 2007 increasing numbers are going to be entering their retirement with mortgage commitments. The key to the ‘Treating Customers Fairly’ principle explicitly laid down by the Financial Services Authority is going to lie with lenders taking a careful look at individual circumstances and considering an all encompassing approach of incomes. It may include a careful examination of other assets and future income. Ensuring that the borrower can afford the loan will always
remain the priority of the responsible lender, but calculating future retirement income in clear terms is a challenge, especially if a product is being taken out a good number of years from the expected date of retirement. Declining to lend to the borrower solely on the basis of age will marginalise an ever increasing percentage of the population, and fail to address the essential problem of calculating how borrowers’ mortgage commitments could be met long into retirement. In an aging society where people are working for longer, there is and will continue to be, without doubt, more and more people looking to remortgage their property.
Kevin Purvey
head of sales, Cheltenham & Gloucester and Scottish Widows Bank
sense. Do you want to be a part of the next Bigger Issue? Email
nia@thepublishinggroup.co.uk
mortgage introducer MAY 2010 15
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