Mortgage lenders lift upper limits to help solve an age-old problem

The combination of an ageing population and no set retirement age means some people now want to be able to pay their mortgage until much later in life, while rising property prices and divorce mean others are not buying until they are much older.

But the prospect of older people being able to get a mortgage was, until recently, minimal – no matter how low risk or good their credit score. New figures, however, show the tide is beginning to turn and lenders are raising the maximum age of repayment to 80 and beyond.

“The situation has been improving of late, with a number of larger banks and building societies increasing the age by which the mortgage has to be paid off,” says Adrian Anderson from broker Anderson Harris.

At the start of this month, for example, there were around 30 building societies willing to lend to borrowers up to – or over – the age of 80, in what is a welcome and timely change for an ageing population. According to the Building Societies Association (BSA), the UK already has 11.6 million people over the age of 65, and predicts this could rise to 16 million within 20 years. Until recently, however, the industry has been reluctant to lend to older borrowers.

The 2014 Mortgage Market Review required banks and building societies to be much stricter about who they lend to. “As a result, many restrict lending that runs over a certain age – meaning older borrowers have found themselves penalised when it comes to getting a mortgage post-state pension age,” says Anderson.

Now it appears that lenders are recognising that people do not pay for their homes in a uniform way, so are opening up their terms and conditions. Figures from regulatory body the Financial Conduct Authority show that from 2014-15 there was a 3% rise in the number of borrowers who will be older than 65 at the end of their mortgage.

Figures from the BSA show more and more lenders are recognising this trend. There are now seven societies which will lend up to age 80, 10 which will lend up to 85, and 13 with no maximum age limit at all. One of the more recent converts to this is Leeds building society, which raised its maximum age for residential applications from 75 to 80, while the Teachers building society has increased its maximum lending age at end of term to 83 on all its standard mortgages.

Some large lenders have also changed tack. Back in July, Nationwide unveiled a new maximum age for borrowing of 85, both for existing customers and those remortgaging from other lenders. This is available across its products, but does come with restrictions – a limit of £150,000 for new borrowing, and a maximum loan-to-value of 60%. Customers must be in receipt of “stable and ongoing” retirement income, and only this can be used when calculating affordability.

In March, meanwhile, Halifax raised its age limit by five years to 80, with the requirement that anyone borrowing beyond retirement must provide proof of income.

“Lenders are reviewing and raising their upper age limit because they recognise people no longer uniformly retire at 65 or 70,” says Brian Murphy from the Mortgage Advice Bureau. “They also realise that some older borrowers have got pensions or other incomes that allow them to service mortgage payments well into retirement. It’s reasonable to expect that other lenders who currently have lower upper age limits may well consider raising them in the future.”

The good news for older borrowers is that there should be no additional age-related fees or premiums. Nationwide says its rates are no different from those on mortgages for all other borrowers, and that there are no extra costs or insurance requirements. Halifax says its products, fees and rates do not change based on a customer’s age, and that life insurance is not a requirement.

However, while lenders are quick to allay some of the potential fears associated with borrowing in later life, there are still certain sticking points.

“Before we get carried away with how great things are for older homeowners, it’s important to remember that borrowers must demonstrate that there is sufficient income to support later-life lending,” says Mark Harris from broker SPF Private Clients. “It is not inconceivable that a consultant or architect might be able to work into their late 80s, for example, whereas it is less likely that a labourer could do so. Here a common-sense approach is required – something readily adopted by smaller building societies, but not so much the larger volume players who don’t look at applications on a case-by-case basis.”

One of the key differences with smaller societies is the fact that underwriting takes place manually, rather than by computer. “For example, the Family building society will assess each applicant on its merits, but can offer mortgages to well beyond the typical maximum of 75,” says David Hollingworth from broker London & Country.

Equally, despite the fact all this sounds encouraging, the reality is that many lenders still show no signs of budging. “Even though the regulator never placed any specific maximum on the age of a borrower at the end of the mortgage term, the majority of lenders have elected to impose a maximum age of 70-75,” Hollingworth says.

“This is irrespective of proof of affordability. Barclays and NatWest, for example, both require the mortgage to be repaid by the age of 70; TSB, Tesco bank and Santander all have a cut-off at 75.”