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Over 50's will bit hit by new mortgage regulations

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Comments

  • Dunroamin
    Dunroamin Posts: 16,908 Forumite
    Percy1983 wrote: »
    This is all well and good, but what if houses prices decrease and there isn't enough to cover the mortgage? (yes I agree its unlikely, but there is a risk)

    You need a lot of equity in the property for it to be feasible - I think my parents had 50%.
  • grizzly1911
    grizzly1911 Posts: 9,965 Forumite
    ukcarper wrote: »
    I'm not talking about I/O and I don't see the problem with lending to a 55 year old.

    What I am saying is that each application should be based on the merits of that application and a blanket band should not be applied.

    I/O was another part of thread as was my comment bout age profile and differing risk characteristics. I wasn't advocating ablanket band, but once you fall outside it pricing risk changes.

    These days lenders like to bundle up their debt and sell it on to unlock liquidity securitisation. The price they get will be dependent on the profile of the bundle. If it certified as meeting a strict set of criteria - say standard 25 year repayment with good LTV and salary multipliers they will get a better price than a mixed bag where the parameters differ from the norm.

    With tight specification by the FSA they aim to make the bundles of "good" debt more transparent and easier to deal with/in years down the line.
    "If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....

    "big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham
  • ukcarper
    ukcarper Posts: 17,337 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    MouseTrap wrote: »
    My previous comments were a bit flippant but your example is slightly strange. For me it is common sense that a 55 year old should not take out a 25 year mortgage.

    They should be able to take out a mortgage for a shorter period, so long as they can afford the repayments.

    Perhaps in your example the person who retired early should consider returning to work in order to pay off a shorter mortgage? (Unless there are other factors preventing work of course). It's lovely to be able to retire at 55 but as the individual's circumstances have clearly changed, a return to work could be the most sensible option.

    I certainly wouldn't want a mortgage beyond retiring age but if circumstances arise and a person needs one so long as they can afford it I don't see a problem.
  • MouseTrap
    MouseTrap Posts: 43 Forumite
    ukcarper wrote: »
    I certainly wouldn't want a mortgage beyond retiring age but if circumstances arise and a person needs one so long as they can afford it I don't see a problem.

    The problem is life expectancy. Harsh but true. Also in your example the 55 year old can return to work for 10 years and easily afford to pay off a £30k mortgage in that period. Problem solved?
  • ukcarper
    ukcarper Posts: 17,337 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    grizzly1911 wrote: »
    I/O was another part of thread as was my comment bout age profile and differing risk characteristics. I wasn't advocating ablanket band, but once you fall outside it pricing risk changes.

    These days lenders like to bundle up their debt and sell it on to unlock liquidity securitisation. The price they get will be dependent on the profile of the bundle. If it certified as meeting a strict set of criteria - say standard 25 year repayment with good LTV and salary multipliers they will get a better price than a mixed bag where the parameters differ from the norm.

    With tight specification by the FSA they aim to make the bundles of "good" debt more transparent and easier to deal with/in years down the line.

    So what is the lower risk £30k secured against £150k or £135k secured against £150k
  • ukcarper
    ukcarper Posts: 17,337 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    MouseTrap wrote: »
    The problem is life expectancy. Harsh but true. Also in your example the 55 year old can return to work for 10 years and easily afford to pay off a £30k mortgage in that period. Problem solved?

    The person could be 60 and unable to get a job. The loan is secured against a property worth 5x loan so the chance of it not being repaid is very small.
  • grizzly1911
    grizzly1911 Posts: 9,965 Forumite
    ukcarper wrote: »

    So what is the lower risk £30k secured against £150k or £135k secured against £150k

    Depends on their ability to meet the service the repayments over a given period.
    "If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....

    "big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham
  • ukcarper
    ukcarper Posts: 17,337 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    grizzly1911 wrote: »
    Depends on their ability to meet the service the repayments over a given period.

    and the chance of recovering loan if they default
  • grizzly1911
    grizzly1911 Posts: 9,965 Forumite
    ukcarper wrote: »
    and the chance of recovering loan if they default

    Security may affect pricing but it shouldn't influence the risk decision.
    "If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....

    "big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham
  • ukcarper
    ukcarper Posts: 17,337 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    grizzly1911 wrote: »
    Security may affect pricing but it shouldn't influence the risk decision.

    But the risk does not only include risk of loan running term but the risk of losing money on loan.
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