New guidelines could mean that some older people will no longer be stuck in properties they want to move out of – the so-called “mortgage prisoners”.
According to a new report released this week by the Building Societies Association (BSA), building societies and other mortgage lenders are to take a look at their age limits for borrowing, and the move could see more people over 65 being able to take out a mortgage.
Since the introduction of Mortgage Market Review (MMR) rules in April 2014, older borrowers have found it more difficult to secure a mortgage as many lenders are unwilling to grant them a mortgage that runs beyond their normal retirement age. In some cases, this has meant people over 40 have struggled to take out a 25-year mortgage as it would run until after their normal retirement age of 65.
Mortgage Market Review
After the MMR, affordability checks were introduced to prevent people from taking on a mortgage they could struggle to repay. As part of these checks, lenders look at applicants’ sources of income. As mortgages typically last for 25 years, lenders are concerned about taking on new borrowers who would retire during the term of the mortgage and potentially experience a drop in income.
The new report from the BSA could mean that lenders will look again at their rules and take a more flexible approach to people who are due to retire during the term of their mortgage. For example, if borrowers could prove that they have a good level of pension provision then lenders may be satisfied that they could afford the repayments even after retirement. The report also suggests that lenders should work with insurers to make it less risky to lend to older borrowers, as well as offering mortgages that can develop with each stage of their borrowers’ lives.
Borrowing over 50
The Council of Mortgage Lenders (CML) is expected to publish its own proposals on repaying mortgages into retirement in the next few weeks. If you’re looking to take out a mortgage and you are over 50, there are a few ways you can prove to lenders you’ll be able to afford to repay. For example you may need to show that you will still have a regular income once you’ve retired, whether this is from a pension annuity, the state pension or other savings.
You could also speak to a mortgage broker like Ocean as they have access to a wide panel of lenders and will be able to advise you on which are more flexible about older borrowers.
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