End of retirement age could prompt lending policy review

17 January 2011 | By Natalie Thomas

The Council of Mortgage Lenders says scrapping the default retire-ment age could make lenders recon-sider their lending polices to those in retirement.

Last week the government ann-ounced that from April 6 2011, employers will not be able to make employees retire at 65 years of age.

But although the government is removing the default retirement age, it will still be possible for individual employers to operate a compulsory retirement age as long as they can objectively justify it.

A number of lenders set their own limits on who they will lend to in retirement, based on the govern-ment’s default age.

A spokeswoman for the CML says it will be speaking to the Financial Services Authority and lenders about what the change to the default age will mean for lending to those in retirement.

The Mortgage Market Review says lenders must take into account any future changes in a borrower’s income, including retirement, when assessing affordability.

The CML spokeswoman says: “The issue is whether lenders will still choose their own cut-off age or trust borrowers to say when they plan to retire, and whether this will tick all the regulatory boxes.”

She says it is too early to say if lenders will take any action.

But she adds: “It will not become clear until we hear from the FSA regarding what this means for lenders.”

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