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Are older people getting a harsh deal from lenders?

An elderly gentleman wearing a sun hat

Some lenders have adopted new rules that make it harder for older people to get a mortgage. Many are also struggling to get credit cards and loans too, even when their finances are in order. What about you?

Some lenders now flat-out refuse to offer a mortgage to any customer who would reach the state retirement age during the length of the term.

Others will demand evidence that the customer is saving into a private pension in order to approve this sort of mortgage.

Even the highest-earners with decades of sensible borrowing behind them could be left unable to secure a deal for a new home, as this couple recently found out. Victoria Wallace, 48 years old, was reportedly turned away by banks and building societies for a mortgage because her husband was deemed ‘too old’ at 61.

Lack of flexibility

Getting hold of a credit card can be just as difficult. Many credit card companies will decline applications from even the wealthiest pensioners, if they no longer earn a substantial salary.

In fact, Lloyds Bank recently issued an apology to an 80-year-old customer after staff mistakenly informed her that she was too old to even apply for a credit card. I can only imagine how insulting this must feel to someone who has been careful with money their whole life.

This might be a necessarily cautious approach with many applicants, but there appears to be a lack of flexibility when it comes to older generations applying for credit, especially when you consider that the average retiree now earns more than those still in work.

Time for change?

Older people have traditionally been given a rougher ride when applying for financial products.

Thankfully, they appear to be getting better access to car insurance, travel insurance and other financial products in recent times.

Do we need similar changes to ensure that the seniors who are clearly creditworthy are given better access to borrowed money? Let us know if you’ve been unfairly declined credit or a particular financial product due to your age.

Derek Spoors says:
29 July 2014

I have had problems in increasing my credit card limit even though this was just to keep pace with an affordable increase in my spending pattern. The prime reason for using a credit card rather than a debit card is that the bank pays me to do it (through cash back).

The present limit is about £2,000 against liquid assets of £22,000 and a net wealth in the order of £450,000.

coco says:
30 July 2014

Derek, u shouldn’t publish your wealth on internet….

You state with reference to declining credit card applications that ” this might be a necessarily cautious approach”.
How can that possibly be the case. Applications should be approved on the basis of income and credit record whatever the age of the applicant.
If there is an argument for a more favourable rating, then it should go to pensioners. If you are of working age you might lose your job and therefore your salary, for a variety of reasons. You are only likely to lose your pension income given a complete and catastrophic collapse of the pensions industry. If you have substantial index linked pension income then, in terms of reliability, you probably belong to the lowest risk group

Ian Chisholm says:
2 August 2014

My wife and I recently applied to Nationwide for an addition to our small mortgage in order to fund a replacement roof on our conservatory. We currently have a lifetime (repayment date April 2048) interest only mortgage which represents just 17.5% of the property value. The additional loan that we requested would have raised the mortgage amount to 20%. We are both aged 74 and have 5 pensions between us, so affordability of repayments is not a problem. Nevertheless we were turned down solely because of age. “Within the FCA guidelines an upper age limit of 75 is recommended and the Nationwide has adopted the maximum age limit”. However they would be prepared for us to take a 5 year personal loan for the amount required, albeit at a higher rate of interest! How can this be rational?
We eventually took out a 5 year loan with Sainsburys Bank as they offered a better rate than the Nationwide.

My husband and I moved abroad and in doing so, sold our house. We returned last year and currently renting a house. We would like to think we could own our own home again despite nearing retirement age. I wonder if this will ever be possible? Has anyone any advice?

Carol – It’s going to depend heavily on how much capital you have at your disposal and what sort of property and location you are looking for. There are properties available in almost any price bracket all over the country but the more you refine your needs the more the price will change [usually upwards!]. If you require a loan, any mortgage offer will be based on your income after retirement and the term could well be limited which would increase the monthly repayments. It’s worth going for though as owning will always be better than renting, especially as you get older. To boost your capital, try to sell off now anything in your home that you no longer need or will not have room for or won’t need in the future, including good quality clothes and other personal items. It will reduce the removal costs as well and simplify a house move.

Good advice JW.

It is wise to consider that not all couples have equal work pensions so affordability may be an issue on a death. This leads to a sensible short term life-policy.

Also that even with low inflation a long-life may mean the purchasing power of the pensions diminishes. Obviously there are certain pensions index-linked which would cushion the effects.

When I managed blocks of flats it was always a problem when elderly owners would fight any costs destined to keep the blocks in good repair as they did not have the resources any longer.

Personally I think that retirement flats or retiring to a block of flats need a close look at for the elderly and their off-spring to appreciate the costs and benefits.

I can promise you that running costs for new blocks of flats is always understated. Older blocks may require major refurbishment every couple of deacdes so timing a purchase or sale can be interesting.

Carol, you could talk to Which? Mortgage Advisors to find out what loan you could get and on what terms. That would tell you how much you could spend.

That is an idea.

What you can afford now and what is wise may be beyond a mortgage advisers capability. Maybe not. Certainly an initial approach may be in order – I am not sure when you pay. John Charcol’s can also be used for an initial chat.

It would be interesting to have a subjective comparison.