4th May 2017 at 7:55am
Good news, things are looking up for older borrowers as a welcome new trend hits our high streets.
Halifax raised the age limit for mortgage borrowers by five years to 80 with another big lender, Nationwide, following hot on their heels with a rise of their own from 75 to 85. And thoughts are other lenders will not be far behind.
With two big lenders looking to up the maximum age limit on mortgages, the chances of now getting a mortgage in later life have just improved.
What’s the impact?
Despite changes to employment habits, with many workers staying in their jobs until the age of 70 or more, the older borrower has still not proved an attractive option for lenders, up until now it would seem.
Nationwide’s head of mortgages Henry Jordan said: “Access to the mainstream market has been a challenge for older customers, resulting in their needs going unfulfilled. We are taking a series of steps to meet a growing demand from customers to be able to borrow in later life”.
How could it look?
This move by Britain’s biggest mortgage lender Halifax means that a 54-year-old customer could now take out a 25-year loan and repay the loan before his or her 80th birthday.
And the longer age limits massively improve the affordability of loans for older borrowers too. A £100,000 mortgage at age 65, which has to be repaid by the age of 75, costs £966 a month if looking at a 3% interest rate. But if the borrower can extend it to the age of 85, as would be the case with Nationwide, the cost comes down to just £555 a month.
Reasons to be cheerful
And there are many more reasons to applaud this development.
Over time we’ve seen cultural trends and needs change. Later life is not all about a pipe and slippers, many people in their 50s and 60s are still looking to make life changing decisions, and many of these could be fuelled with the option to take out some further lending.
Access to a mortgage in later life might offer a number of benefits:
Increased options: With a significant number of older people struggling to be granted a mortgage, it’s forced them to take retirement decisions based solely on what they can afford, limiting their options and often forcing them to stay in a property that is no longer suitable for them.
Rightsizing: The traditional view is that people will downsize when they retire, and that this will come at a reduced cost, but often it’s not that simple. The house they choose might be smaller in size but the area it’s in more desirable (known as ‘rightsizing’), in effect pushing the cost up, so a mortgage may still be needed.
Market momentum: With people being forced to stay in the family home because they can’t get a mortgage, it can hold up the whole housing chain; taking those homes out of the market and ultimately reducing the number of properties available for first-time buyers. Making it easier for older people to move on should benefit buyers at every level of the property ladder.
That dream home: Rising house prices have squeezed the whole property ladder, with many people not able to afford to buy their first home until they are in their 30s or 40s. If you can only buy your first home when nearly 40, then you don’t seem to have much time to scale up. But now turning 60 no longer means it’s ‘game over’ – the chance of a 25-year mortgage means you can still aspire to own that house you dreamed of.
Silver splitters: The divorce rate among those in their 50s is increasing. This relaxation of the mortgage age criteria means those faced with starting fresh, can begin the buying process again much later in life.
Ticking the boxes
But before you get too excited, there are things you’ll need to take into consideration and boxes you’ll need to tick before embarking down this path.
As with any mortgage, it will still come down to an applicant’s ability to pay and meet certain criteria. For example, Nationwide will grant mortgages of up to £150,000 to older borrowers if they can prove they have enough of a pension to afford the repayments. And the higher age limits are only open to borrowers who can prove that the loan will be no more than 60% of the value of their home.
You’ll also need to take your family into consideration. So long as the value of your property is enough to pay off the balance of your mortgage, there’s every chance it could be settled after your death from the proceeds of the sale, which sounds great. However, in the event it doesn’t, for instance a crash in house prices, you’ll need to discuss this with your family so they know exactly what to do, your legacy to your loved ones could be debt.
Also remember that the property may take some time to sell, and that the mortgage payments must be maintained in the meantime. So make sure you’ve planned for this.
The current mortgage landscape
So what does the market currently look like? As you’ll see from this list of mortgage providers, the trend seems to be towards 75, with anything beyond considered on an individual basis. However, with this move by the big two, experts are suggesting the landscape may change.
- Nationwide – Maximum age at the end of mortgage term is 85.
- Halifax – Maximum age at the end of mortgage term is 80.
- Barclays – To be repaid by 70 or retirement, whichever is the sooner. Other applications considered on an exceptional basis.
- Chelsea Building Society – Must be repaid by the age of 75. Although may consider beyond 75 on an individual affordability assessment.
- Clydesdale Bank – Interest only loans must be repaid by 70. Repayment mortgages by 75. Individual cases considered.
- HSBC – No set age limit for repayment but loans after the age of 75 are reviewed on an individual basis.
- Leeds Building Society – Must be repaid by the age of 75.
- Mansfield Building Society – Some loans can be repaid up to the age of 80.
- Metro Bank – No maximum age providing you meet their affordability checks.
- NatWest – Must be repaid by the age of 70.
- Santander – Interest-only loans must be repaid by the age of 65. Repayment mortgages by the age of 75, or by the time you have retired, whichever is the sooner.
- Tesco Bank – Must be repaid by the age of 75.
- Yorkshire Bank – Interest only loans must be repaid by 70. Repayment mortgages by 75. They will look at individual cases beyond that.
- Yorkshire Building Society – Must be repaid by the age of 75. Although may consider beyond 75 on an individual affordability assessment.
This is a welcome step, freeing up funding for those that still need it, but if considering taking out a mortgage in later life then it would be prudent to seek financial advice first. An adviser can help in a number of different ways: firstly by working out whether you really can afford it, secondly by drawing up a retirement plan that makes it possible, and thirdly by providing the evidence that the mortgage lender will be looking for.
A mortgage at this life stage will be about considering all your financial arrangements as a whole, and planning ahead.
The information in this blog or any response to comments should not be regarded as financial advice and is based on our understanding in May 2017.