Thought you were too old for a mortgage? Now you can have one at 95

Think you’re too old for a mortgage? Think again. Guardian Money can reveal details of a new home loan you can have until you are 95.

As the name suggests, the 55+ Mortgage is exclusively for over-55s and is being described as “a flexible way to borrow money in later life”. This isn’t an equity release deal – it’s a standard mortgage where you pay the interest on the loan each month and retain 100% ownership of your property.

Leading mortgage broker John Charcol hailed the deal – from retirement specialist Hodge Lifetime – as “a massive shot in the arm for the mature borrower market”. Until now, most lenders have had a cut-off age of 70 or 75.

But what are the catches? What about other options? And would you still want to be paying off your mortgage when you are in your 90s?

While much has been made of the plight of first-time buyers, a lot less attention has been paid to older borrowers, many struggling to get a mortgage as a result of what some claim is an ageist attitude with many banks and building societies only granting a loan up to an individual’s planned retirement date.

But with high house prices, student debts and a rise in the age at which couples have children, many people are tending to buy a home later and opt for a longer repayment term. As a result, mortgages that last into retirement are becoming more common. On top of that, of course, the population is getting older: the UK already has almost 12 million over 65s.

Last November, Britain’s building societies pledged to review maximum age limits for borrowers.

The offering from Hodge Lifetime – which specialises in equity release and annuities – is currently available through selected mortgage brokers ahead of a wider launch this summer.

This is a standard residential mortgage, albeit an “interest-only” one, that’s available for house purchase or remortgage, and which can also be used to fund home improvements or consolidate existing debts. The oldest someone can be when they apply is 85, and the maximum term is up to 95. However, if a couple is applying, both criteria relate to the youngest borrower – so in theory an 84-year-old married to a 100-year-old could take out this deal.

The property must be in England or Wales and worth at least £170,000 and no more than £1m (though the lender may accept a property worth more).

Meanwhile, the minimum loan is £20,000 and the maximum £500,000, though the most you can borrow is 60% of your property’s value, and there is a requirement that you have at least £150,000 equity remaining – that may be upped if you live in a pricey area.

Employment, pension, investment and rental income will all be taken into account when assessing someone’s ability to afford the loan. And they must have a suitable strategy to repay the capital at the end, which could include downsizing, selling a buy-to-let or holiday home, sale of investments or an endowment policy payout.

John Charcol and London & Country are among the brokers offering the 55+ Mortgage. Simon Collins, product technical manager at John Charcol, says: “As we’re living longer and having to work longer, then, by extension, we’re likely to want to borrow for longer, too.

“Yet these experienced borrowers – whose credit records are likely to be exceptionally good – have, in the main, been ignored by the major high street lenders. This product will help bring more competition into this extremely underserved sector.”

He adds that there is still a good level of competition when it comes to borrowers in their late 50s, with some of the larger lenders prepared to let a mortgage run up to age 75, but once you hit your 60s, “a reduced term starts to hammer affordability”. By this he means that shorter-term mortgages - 15 years, say - cost more per month, which means they can be much harder to obtain because of the income required to service them.

There are three rates available for the 55+ Mortgage: a two-year fix at 3.49%, a 3.95% five-year fix, and a two-year discounted-rate deal with a pay rate of 3.3% (the standard variable rate is currently 4.2%).

So how much might someone typically pay? Let’s say you want to borrow £90,000 over a 20-year term, and you took out the five-year fix and added the £995 product fee to the loan. For the first five years you would pay £299.53 a month, then (assuming the deal runs to term) £318.48 a month for 15 years.

It’s worth noting that the payments are lower because this is interest-only – on a repayment basis the initial payments would be £555 a month – but, of course, at the end of the term you will have to pay back the full amount.

So how does this stack up against the competition? Hodge Lifetime rates are reasonably competitive, but some older people may be able to get a cheaper loan. Building societies are worth a try as they tend to be more flexible than banks.

Epsom-based National Counties building society will consider applicants up to age 89 but will not take into account employment income beyond 70. Deals include a five-year fix at 3.29%.

Marsden building society offers a range of “older borrower” deals including discounted-rates starting at 2.49% and two-year fixes from 2.99%.

Similarly, the Stafford Railway and Market Harborough building societies both say 85 is the maximum age by which one of their mortgages must be repaid. Market Harborough has a five-year discounted-rate for applicants up to 75 where the current pay rate is 3.45%, and a term discount for 75-85s where you currently pay 3.99%. Its minimum and maximum loans are quite chunky – £100,000/£1.5m – and while the sale of your home will be accepted as a repayment strategy for interest-only borrowers, they must have at least £250,000 of equity remaining in their home.Other societies are worth a look, too. For example, Bath building society does not have a set maximum age, but looks for proof of continued income, while Harpenden building society has said in the past that it has no age limit on its mortgages.