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Should older people be able to take out a mortgage?

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Profile photo of David Blake David Blake Which? Mortgage Advisers
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I am 70 and retired, can I get a mortgage?

That’s a very good question…

Of course, any mortgage lending is based on your individual circumstances such as income, expenditure, credit score etc, but to answer the question – yes!

If the mortgage lender deems it affordable for you, it may well be possible to take out a mortgage at this stage of your life. Now, as to whether you should take a mortgage out at this stage of your life is an entirely different question and will very much depend on your individual circumstances.

And although I appreciate property prices are increasing in many areas, so investing in property could make sense to some, it’s important to understand that just because you can get a mortgage, doesn’t necessarily mean you should.

Mortgages for older people

To meet the needs of an ageing population, many lenders have become more flexible when it comes to maximum lending ages, with many smaller Building Societies lending up to the age of 85.

There are even some smaller Building Societies out there that don’t have a maximum lending age limit at all.

So it seems many smaller mortgage providers are taking action but this raises the question, are larger high street lenders doing enough to help older borrowers?

Well… the good news is some high street mortgage providers are making a start.

This week we’ve seen Halifax increase their maximum lending age to 80, and Nationwide raise their maximum lending age for existing customers to 85.

We think this is fantastic news and a step in the right direction to help older borrowers. Hopefully, this will lead to other high street lenders following suit.

What’s the catch?

Naturally, borrowing into later life will come with some restrictions and caveats to think about.

If you are married and borrowing with a partner, the lender will want to be comfortable with your income situation should one of you pass away. Also, because there might be a limit on how long you can borrow your mortgage over, this could have a restriction on how much you could borrow.

Of course, in a perfect world we’d all love to have our mortgages paid off by the time we retire (at 50 I hear you cry…) but as we are all too aware, this isn’t a perfect world – for various reasons, many of us will carry our mortgages into later life.

So what do you think about mortgages for older people? Would this be helpful to you, or do you have concerns about post-retirement borrowing?

Comments
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BARBARA GOODWIN says:
14 May 2016

It’s ridiculous to restrict pensioner borrowing on age grounds; let’s face it, we’re a far better bet than many younger people with questionable job security; in most cases our income is pretty well guaranteed for life, which is more than can be said for many of those in employment or self employed. Also, we don’t have the family drain on our incomes. So, if we meet the affordability criteria of income v borrowings, I fail to understand why the banks aren’t queuing up to lend us money.

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dieseltaylor says:
15 May 2016

” Should older people be able to take out a mortgage? ”

I thought many were in arranging buy-to-let mortgages through Which? Mortgage Services.

Obviously subscribers are paying to subsidise this business.

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malcolm r says:
15 May 2016

dieseltayler, you are in danger of attracting the wrath of those who don’t like criticism of Which?’s operation. I have asked in the past where the money comes from to fund these loss making commercial businesses and can only assume it is from my subscription. I thought my subscription was just to a charity that supported Which?’s investigation, testing, reporting and campaigning activities. Maybe it is – someone will tell us.

There are plenty of decent mortgage brokers – a Trusted Mortgage Broker scheme could deal with them.

Lending money for house purchase should depend upon the ability to repay, and the ability of the lender to reclaim the loan in the event of default. Lenders should, as independent commercial organisations, be free to have their own rules as to how they distribute their (limited) loan resources. They might favour first-time buyers over buy to let for example. We do not have a “right” to borrow someone else’s money, but in a competitive commercial world there will always be institutions that meet the demand. That is what mortgage brokers are there for aren’t they? – to winkle out the appropriate lender.

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John Ward says:
15 May 2016

I assumed Which?’s trading loss on mortgages would be offset by trading gains through other channels [publications etc].

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malcolm r says:
15 May 2016

I rather thought the monthly publications were part of my “subscription” as these are not on public sale. I think there is confusion (in my mind anyway) about what being a member is – or was – and whether the charity is effectively defunct and it has become a trading organisation. This criticism was leveled at Age UK.

However sorry we are off topic. Mortgages are now no more than ordinary loans, are they not, but at much more attractive rates of interest,for much larger amounts of money and for much longer terms normally because they are backed by solid collateral (unless we have another crisis). We don’t get tax relief like I did when I bought my first house, except indirectly if you are a landlord. The big problem has always been the increasing size of the loans on offer, compared to income, which has directly fueled house price growth. It is a vicious circle – if you restrict loan to earnings even more and reduce prices somewhat, it will still be difficult to get on the ladder as the deposit will still be large in monetary terms.

I’d like some examples of the really old people who want mortgages. Are they selling and trading up – but have a large equity in the property so are a safe bet. Are they buying for the first time – presumably either with a big deposit and/or a big pension, so a safe bet. Or are there other more tricky cases?

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John Ward says:
15 May 2016

I think the circumstances at this point in the mortgage market come in many different shapes and forms. The situations I have read about include people who have considerable equity in their present house but not enough to buy a property [even a smaller one] outright in their chosen relocation area so they can be nearer to their family or to the services and facilities they might need in later life. Others have returned from living abroad and want to buy a property, some just want to “escape to the country” so they have more space in which to pursue their interests, and others might be starting a new life after death or divorce. There will also be people coming out of occupational accommodation at the end of their careers, and people who have been in rented accommodation and have not managed to build up sufficient funds to buy outright. For many the mortgage might not be large, or long term, and will be required to carry out modernisation or improvements to their existing home. My guess would be that most of the people seeking these loans will be experienced and responsible and in most cases a good risk for the lender. The lenders will no doubt protect their own position quite diligently and the terms and conditions might not be particularly favourable compared to those offered to younger or more conventional buyers.

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John Ward says:
15 May 2016

In referring to the trading gains from publications, Malcolm, I was thinking of the books that are sold by Which? that anyone can buy. Some have been going for years but perhaps they are not profitable.

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malcolm r says:
15 May 2016

Thanks John 🙂

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John Ward says:
15 May 2016

Unless I have missed something, mortgages up to the age of 85 means the repayment term of the mortgage must be complete by that age, in other words for a 25-year mortgage it will have to start no later than age 60 years. This is not clear from the intro and it could give a false impression.

Many people in their fifties and early sixties have been finding it very difficult to get a mortgage to assist with downsizing or relocating following the recent introduction of tighter capacity requirements on mortgage lending. Even if they only needed a small proportion of the purchase price or a loan period of just ten or fifteen years these have been unavailable. This loosening of the strings for this bracket is good news. Lenders will still carry out checks to make sure the income stream is reliable and people are not over-extending themselves.

I can’t agree entirely with Barbara’s generalisation about pensioners’ financial security. Unfortunately a very large number do not have guaranteed incomes for life, but in principle, so long as the income to borrowings ratio is manageable in the event of the main income earner’s decease [including taking account of any life assurance], and the property is good collateral for the loan, this could be extremely helpful to a lot of people who have become trapped and it might release more useful properties into the housing market. I would hope this flexibility will not be used for speculative property investments however; I suppose the Halifax can do what it likes with its shareholders’ money but the Nationwide is a mutual organisation and should be more careful.

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dieseltaylor says:
15 May 2016

I now realise the importance of the Top Cat advert and why an apparently feckless cat can have a mortgage. Decent Pension.

[Top Cat born 1961]

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malcolm r says:
15 May 2016

It looks like he has bought a dwelling for multiple occupancy. I wonder if he has registered that with the LA and installed smoke alarms in every room?

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John Ward says:
16 May 2016

I must have missed these adverts. Is Officer Dibble not around to enforce the law?

Halifax . . . Alley Cats . . . it has a certain poetrical potential perhaps.

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Katherine Read says:
15 May 2016

When I took out my current mortgage in 2005, I had to restrict it to 22 years because 25 would have taken me over 65. I am glad that I will have paid it off by then. I would find starting a mortgage now stressful. There is a higher chance that I would become ill/disabled and unable to work before I had paid it off.

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John Ward says:
16 May 2016

I hope older people applying for home loans will give very careful consideration to those contingencies, Katherine. I assume that the lending organisations will insist on payment protection insurance [without any mis-selling, of course].

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DebbieG says:
16 May 2016

I see no absolutely no reason why older people shouldn’t take out mortgages if they are able to repay them and they understand all the risks and pitfalls, exactly the same as anyone else. If you’re on a pension you know what your monthly income will be, rather than running the risk of being made redundant, for example. My father took out a small mortgage when he was dying of cancer, but the bank was more than happy with it as he already had life assurance in place, so they knew they were going to get their money back one way or the other. My parents were able to move to their dream retirement home, even if it was only for a few years.

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John Ward says:
16 May 2016

I agree Debbie. The other consideration in the lender’s assessment is the loan-to-value ratio and I would expect in most cases older borrowers’s assets would be in a better position than many of the risks that banks and building societies take on with younger borrowers. People should also consider insurance companies as a source of home loans, usually linked to life assurance but sometimes more attractive than the obvious high street offerings.

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