MSE News: People over 40 'denied mortgages'

Callie22

My partner and I have just bought a house, and because he is in his mid-40s we were not able to get a standard 25 year mortgage, despite the fact that I am eleven years younger than him. We were told that for couples, the mortgage was based on the age of the oldest partner and that will restrict the length of your mortgage. We were very lucky that we were able to buy now as I could see us stuck in rented accommodation for the rest of our lives if we'd waited a couple more years because of problems like this. What's stupid is that our mortgage is about half of what we were paying in rent. It also annoys me that they're still basing everything on a retirement age of 65. My state pension age (and OHs, I think) is already older than that!

DepositSaver

I took out my first mortgage, for a 27 year term, earlier this year, a couple of months before I was 40. During the application process NatWest asked me for proof of post-retirement income, by which they meant income after 65.

I went to the government's state pension calculator at https://www.gov.uk/calculate-state-pension , saved the results page which showed my state pension age as 67, then emailed it to my broker who passed the info to NatWest who then no longer required proof of post-retirement income.

Surely it would be useful for the initial application to include a question asking what your state pension age is?

katejo

Thrugelmir wrote: »

Simply not possible to know what someones situation may be like once they reach their late sixties. Not least their health and physical capability to do their job. My partner is already suffering from rheumatism in her fingers and is well short of retirement age.

If someone wishes to have a mortgage past their normal retirement age. All they need to do is start a pension scheme at an early age. Thereby providing a source of income with which to service the mortgage.

So much hot air being puffed over nothing.

When I got my current mortgage I was 43. I only needed one for up to 60% of purchase price as i was already selling a flat. I also had a good end salary pension scheme. I was only allowed a pension for up to 22 years as 25 would have taken me beyond 65. Having a pension made no difference.

regprentice

This was the interesting bit for me ...'He says: "Uncertain pension incomes make it difficult for lenders to assess mortgage affordability in later life, and this may become even harder when the new pension freedoms take effect next year.'

A lot of people are going to assume they can 'build-in' clearing their remaining mortgage to their retirement plans, but i suspect a lack of cast iron guarantee that this will take place (i.e. an endowment type arrangement) will mean lenders clamp down on this.

A bit of a paradox, like needing a bigger house when you have kids but MMR reducing your affordability criteria solely on the basis of you having kids.

Thrugelmir

regprentice wrote: »

like needing a bigger house when you have kids but MMR reducing your affordability criteria solely on the basis of you having kids.

Then people need to plan their budgets accordingly. Not expect to borrow more as they feel the need arises.

amnblog

That is not the culture in this country today Thrug.

There lies the quandary.

MacMickster

Thrugelmir wrote: »

Then people need to plan their budgets accordingly. Not expect to borrow more as they feel the need arises.

Financial planning and responsibility? Having to convince the bank manager that you are a good risk for a loan?

I think that you're still living in the 1960s - and hopefully the future again.

I read this thread and then pictured an MSE editorial in the future outraged that the bullying banks are evicting pensioners from their homes of the last 15 to 20 years.

gadgetmind

Well quite.

"I can't understand why they'd offer me this money knowing that I wouldn't be able to afford the debt once I'd retired", wailed Mr !!!!less.

martin1959

I think there are some valuable points being missed here. I was a mortgage adviser for 20 years and have seen many changes.


People should be able to borrow into retirement at their request, providing they can rationale how the mortgage will be paid during retirement.


1. When people retire they often down size or move to a cheaper area, when any o/s mortgage can be cleared.


2. You used to be able to get retirement mortgages where the loan was conducted on an interest only basis. For example, someone aged 50 takes a 100k mortgage on a £150k property over 25 years with a monthly payment (estimated) £900 per month which they can afford while working. When they retire, the property will be worth (estimated) £200k and the o/s mortgage will be about £40k (estimated). At this point the lender switches the loan to interest only (Retirement Mortgage)with a monthly payment of £140 (considerably less than rent) which can be paid from pension. The property continues to rise in value and when the property is sold the loan is o/s loan is repaid.


This was a popular scheme until it was ditched a couple of years ago.


3. Many elderly want to raise small amounts of money against their properties to release funds to improve their lifestyle, They used to be able to do so with a conventional capital raising mortgage, and cover the interest only payments from their pension. Now they are forced to go to Interest Roll Up schemes with interest rates twice that of high street lenders.


4. Many people have other assets that can be realised at a later date to clear any outstanding mortgage, for example the sale of a business on retirement, sale of an inherited property, or other inheritance.


What the banks seem to forget, is that people are grown up, and most are capable of making reasonable decisions. There is nothing preventing me going to the casino and placing the deeds of my house on red or black, and losing everything.


If I take a mortgage at 35, lose my job 2 years later, and cannot afford the monthly payments, my home will be repossessed.


If I tell the Bank I plan to work until I am 75, but eventually retire at 65 and cannot afford the monthly payments, my home will be repossessed, What is the difference?


(In practice, provided a property is in positive equity, and the mortgagee is keeping up the INTEREST payments on the loan, it is very unlikely a lender would ever get a repossession order from the courts)

amnblog

People being grown up and capable of making their own decision is not how the FCA and FOS operate.

Whilst it is always the lenders fault they will be extra cautious.