Gev Lynott, chief executive, Mansfield Building Society
Since the Mortgage Market Review more stringency has been applied in assessing the financial affordability of older borrowers. But should this have led to the tightening of age restrictions that we’ve seen from some lenders over recent years?
Although recently some progress has been made in product availability, I suspect the maximum ages that have been offered — and that continue to be constrained — by some high-street lenders are more a factor of their reliance on automated credit score based systems.
The Mansfield and other building societies apply an individual, manual underwriting approach, which has the beauty of being able to respond dynamically to the change in an individual’s projected financial circumstances as they extend their lending into retirement.
What needs to be considered is the broader financial capabilities of older borrowers: their ability to manage day-to-day finances and plan for future life events, and their greater susceptibility to circumstances in which they could be considered vulnerable, including both their physical and mental health. With age comes an increased risk of dementia, plus there’s the potential need for long-term care. If the borrower’s health deteriorates over a prolonged period, there are the likely additional medical/care costs and the complications surrounding the administration of their financial affairs.
Lenders recognise the value of professional advice provided by mortgage brokers, who continue to play a key role in ensuring older borrowers are made aware of the full range of mortgage options, both with traditional lenders and from specialist products such as equity release.
A maximum age is not the only factor to consider in product selection for older borrowers. At The Mansfield, we’ve currently set our maximum age at 85 for owner-occupier borrowers; however, we recognise that there are occasions where an individual borrower’s circumstances merit a more flexible approach.
I expect us to be announcing further changes shortly as we continue to evolve our proposition design, product offering and lending criteria for this important, growing customer demographic.
Dick Jenkins, chief executive, Bath Building Society
We all hope to live the later years of our lives mortgage free, but there are some circumstances in which it makes perfect sense to borrow.
Take, for instance, the person who has a good later-life income but needs a sum of money to alter their property to better accommodate their ageing years, perhaps to install a lift or make adjustments to cope with a wheelchair; or even to move to a more suitable home, nearer to other family members.
For some people, the route has been to use traditional interest roll-up equity release products. But a lot of older people want to pass on a decent inheritance to their children and are therefore looking at interest-only lifetime mortgages. It’s refreshing to see the options opening up for older people wanting to borrow as the market develops, and particularly encouraging to see building societies leading the way.
Lending to customers in their 40s and 50s, where the mortgage term goes beyond 65 or even 75, makes a lot of sense to customers who can count on good pension income. Pension income is no less reliable than income from employment and, despite much vaunted anxieties about older people splashing out on Lamborghinis, the cold hard data collected so far since pension freedoms were introduced suggests that most older people are far more responsible than that!
Much has been made of the conduct risks attached to later-life borrowing, and inevitably there are some vulnerable customers whose interests lenders will need to particularly respect. In most circumstances it shouldn’t come as a surprise to family members hoping to inherit that Mum or Dad borrowed late in their life, but sometimes this will be the case (whose money is it, anyway?) and care has to be given to managing this issue.
So yes, lenders must put more training and resource into properly servicing this cohort, and smaller lenders will have the opportunity to be more flexible than ‘factory’ lenders. But just because it’s a little more complicated, it doesn’t mean as an industry we should turn our back on the needs of older customers.
Age should not, in itself, be a bar to borrowing where it is demonstrably affordable.
(Bath has no age cap for residential lending)