The benefits of the escalating mortgage price war are being missed by those over the age of 50 according to the latest figures.
This is the result of stricter rules on lending introduced by the regulator under the Mortgage Market Review. It has made it harder for borrowers over the age of 50 to get a mortgage despite having regular incomes and impressive credit records; meaning they will have no problem sustaining their repayments whilst transitioning into retirement.
Adrian Anderson from the property finance business Anderson Harris stated: ìWhile mortgage rates are at record lows and could go lower still, what would be more useful is if lenders eased criteria instead. The best rates are only available to those with big deposits, and since the new lending rules under the Mortgage Market Review were introduced in April 2014, some borrowers have found it very tricky to get a mortgage, such as older applicants.î
The Mortgage Market Review was originally set up in order to prevent a situation where home borrowers take on more debt than they can manage. Furthermore, it is seen as a way to expunge from the market the dynamic whereby interest-only loans could be acquired without any practical repayment process being designed and executed.
The Financial Conduct Authority have made it clear that they want to safeguard against these issues and thus lenders are forced to ìstress testî home borrowers to ensure that they would not struggle to meet larger repayments if interest rates were to rise. As a result, a number of lenders have cut the highest age a person can be for when their loan finishes.
The reduction has been huge considering it used to be around 85 and now is about 70-75. In fact, up to its cancellation in 2013, Halifax offered a loan specific to the elderly, one that could be settled on death. It was called the ìretirement home planî and allowed applicants to borrow money when they were nearing or even in their retirement years.
There are additional factors that affect the likelihood of an elderly person acquiring a home loan. Lenders are said to be hyper-paranoid about the possibility of people coming to them arguing they were mis-sold loans and thus the possibility of having to evict helpless retired individuals. The executive director of the Intermediary Mortgage Lenders Associations stated: ìNo lender wants to be seen to be repossessing elderly peopleís homes. It would be a public relations disaster.î
Furthermore, there is the issue of correctly forecasting retirement income. In order for home loans for the elderly to be offered this is a fundamental variable to predict and now lenders are not trusting the figures given by pension companies. Instead, a number of them are turning to independent actuaries to do the calculations which has proven to be a drawn out and complicated process. This has caused more hassle for the borrowers in terms of acquiring the loan and the property thus deterring elderly people from applying in the first place.
Simon Tyler from Tyler Mortgage Management commented on the situation: ìOften borrowers go to a lender where underwriting is carried out by computers that reject them automatically. Also some banking staff now take the view that no one is going to be sacked for saying ëNoí.î He suggests that those suffering as a result of this phenomenon should look to the small, independent lenders who often demonstrate more plasticity with their mortgage policies.