Mortgage - Age Discrimination?

dunstonh

but you cannot select age as a proxy for measuring ability to pay.

yes you can. A mortgage is a long term debt. Is it right that someone late into retirement should be taking on a long term debt when they do not likely have a long term life expectancy. They could reject it on affordability or suitability. Much in the same way that most investment advisers have ages 80+ as being unsuitable to start new investments and will usually not recommend investments. Suitability and appropriateness are key to any refusal.

TurnUpForTheBooks_2

dunstonh wrote: »

yes you can. A mortgage is a long term debt. Is it right that someone late into retirement should be taking on a long term debt when they do not likely have a long term life expectancy. They could reject it on affordability or suitability. Much in the same way that most investment advisers have ages 80+ as being unsuitable to start new investments and will usually not recommend investments. Suitability and appropriateness are key to any refusal.

You guys are having to dream up some pretty big numbers for the ages in your examples. Don't you realise you are stereotyping ? As has been the case for the last 30 years for most of us, you have no idea when your customers will

• want to retire (crystal balls)
• actually retire (more crystal balls?)
• need to retire (now that would require some real good advice as well as balls ...)
• be made to retire (moving political feast ... mostly balls up)

and actually it is now formally none of your business to apply your arbitrary age-biased generalisations to it.

So, just for background until it all gets improved, is it 80+* now when you daren't or won't advise your investment customers any longer ? No wonder we have so many 80 somethings now shackled to complicated investment products beyond their understanding which you guys sell them when they are aged below your arbitrary thresholds. The worse thing is that none of you dare even advise them where the exit is :mad:

*Last time I was made aware of any, the "we dare not advise them" threshold was even lower than age 80 with some big firms.

You guys are going to have to rethink quite a few things as part of your new helping, caring, customer friendly, culture for the post 2008 showdown. Haven't you fixed that yet ? How much longer must we wait ?

holly_hobby

I'll cut to the quick, the reason why the majority of lenders cap the max age at redemption at 75 yrs, regardless of affordability, is post the crash lenders want to limit exposure, and unofficially simply don't want the bad press of attempting to evict/force sale in respect of old age pensioners (either through arrears or poor performing investments that have failed to redeem the os mge at end of term) ..... especially those into their 80s or even beyond ...... as the press would probably slaughter them, yet we have to appreciate that they are a business that must actively manage bad or unredeemed debt (just like any other), which essentially is their quandry and dilemma with such mortgagors.

As I said a page back, there are currently a few lenders that choose not to have a max upper redemption age, if suitable affordability is of course proven throughout the requested term - which you may choose to apply to, unless this is just a general discussion thread you've initiated for debate, which if so, will roll and roll I feel.

Hope this helps

Holly x

theoretica

LizzyR wrote: »

Leeds Building Society offer a 10 year fixed rate mortgage at 3.99% and have an upper age limit for loans to be repaid of age 75. BUT, if you are already in receipt of a state retirement pension, they will only consider a mortgage application under their 'lending into retirement' criteria... Without prejudice, is this age discrimination?

Just from what you write it seems not to be age discrimination, but rather pension discrimination. They might lend to a 64 year old not getting a pension but will not to someone the same age who is getting state pension.

Now, as the state pension age for men is 65 this will only affect women. So maybe sexual discrimination could be argued?

jamesd

dunstonh wrote: »

Is it right that someone late into retirement should be taking on a long term debt when they do not likely have a long term life expectancy. They could reject it on affordability or suitability.

Depends on the individual. At younger ages sale of property is an acceptable repayment strategy and one certainty is that eventually the property will end up belonging to a person who has no remaining need for it.

In general I'd prefer mortgage term ends well into retirement because that reduces investment risk, allowing more opportunity to select a good time to clear the mortgage, if desired, or to just wait until death and have the estate take care of it.

dunstonh wrote: »

Much in the same way that most investment advisers have ages 80+ as being unsuitable to start new investments

Here's a range of cohort life expectancies using the 2006-based data for the UK, normal life expectancy version, attained age in 2013 vs remaining life expectancy that half are expected to reach for males:

age 55: 30.6 years
age 60: 25.9 years
age 65: 21.5 years
age 70: 17.3 years
age 75: 13.5 years
age 80: 9.8 years
age 85: 6.8 years
age 89: 5.0 years
age 90: 4.6 years
age 95: 3.1 years

While for both mortgage and investment purposes the individual matters, it's not until age 89 that the remaining life expectancy on average reaches the general threshold for not using investments.

Not that this means it's necessarily wise, but sometimes people do wrongly assume that people at say 65 or 70 don't have long remaining lives when on average they have a couple of decades remaining and do need long term planning, with every expectation of being able to take out a mortgage with 15-20 years duration and have half or more still alive by the end of the term.

Whether a lender wants to collect from an estate and for what percentage of mortgages they wish to do it is another matter but it's unfortunate in my view that such planning to be able to use all available assets to improve lifestyle while still alive is harder than it could be for an individual to do.

dunstonh

The FOS tend to uphold complaints about over 80 investors with no track record of previous investments. The FSA tended to fine firms that did it too. It doesnt mean you cannot recommend investments to over 80s. You just need much stronger justification. e.g. an existing investor of many decades who is in good health. Or bed & ISA of an existing investment.

For those who are late in to retirement, the option of equity release is available if they prefer to have their debt settled on death rather than repay it during their life.

holly_hobby

The caveat with investments for the retired or those in later life, is really all about understanding what they are getting themselves and tying their capital into. Its expected that the adviser having established there are no physical (ie hearing) or cognative imparements to their capacity of understanding, to also recommend the presence of another responsible adult in on the sale/advice (child, younger relative, prof rep, etc). If they refuse this invitation, then the adviser should have this recorded and duly signed by the individual, that they refuse to include any 3rd parties within the discussion/advice process.

The main issue with regards to investments at this age is that the individual (if designed for their benefit) may be unlikely to see benefit/gain within their anticipated lifetime, or be in a position to recoup losses from their other income/longterm retention of the invesment, which may be further compounded by the need for capital withdrawal and being hit by early withdrawal penalties (such as MVAs etc)

Giving investment advice to those of later yrs isn't necessarily the devils work, BUT, the adviser as Duns states, and for a sound sale, MUST ensure that they have covered vunerable person protection inc life expectancy, and covered best advice requirements regarding the reason for the investment to the hilt ... ie thorough assessment of ATR and aspirations, emergency fund retention, diversification of funds, diversity between vehicles re availability of penalty free withdrawal, etc ....

I've reviewed some v good belt and braces later life investment sales, and equalling downright toe curling ones ..... again it could be seen as a bid brother exercise in refusing the business, but if the adviser/provider feels it to be inappropriate to the individuals requirements/ATR/financial circs etc, the main issue is protecting their capital at an age when there may be little chance of they having the income or time to recoup any losses from either poor performance and/or withdrawal pens such as the MVAs etc - yes its protecting the indvidual from themselves, but primarily, no provider wants complaints (or the bad press) from pensionsers (or their estate) where their life savings have evaporated as a result of investment via their firm.

So its not that over a pivotal age you are simply wholly prevented from investing, moreover that any advised sale to this sector should/must be absoutely watertight and wholly appropriate for the above reasons (but then shouldn't all sales to all) ..... to which the sweeping RDR changes should improve the quality and provision of advice and knowledge out there.

As stated earlier, extended residential mge terms (ie with higher/non-restricted upper age limit) with various providers remain available - but take into account the FSA/FCA intervention means that IO may not be available with all, which may counteract the affordability !

Whilst lifetime equity release mortgages (ie interest only, no income assessment, with an open term until death or entry into LTC), may be suitable to some, they are wholly dependant upon property value, max LTV and age of mortgagor - so this will naturally exlude some/many individuals (ie with current medium to high LTVs looking to remortgage) from this option.

The age ceiling is causing problems, especially for mid life+ peeps looking to switch from IO to an affordable repayment and/or remortgage arrangement -to which lenders may re-evaluate once the dust has settled from all recent industry issues.

Hope this helps

Holly x