View more on these topics

Is lending to people aged over 65 a good idea or is it asking for trouble?

Given demographic change and anti-ageism legislation, extending lending to people aged over 65 is a positive move, say our experts.

Mike Fitzgerald is sales director of Brentchase Financial Services

A lot of people are ready to jump down the throats of lenders that do something different – look at what happened when Abbey decided to start lending 5 x income.

When it comes to the question posed here, we have to remember that the older people of today are very different from those of 25 years ago.

A lot of people aged 65 are fit and healthy these days, still working and earning money. And they are not doing this because they have to but rather because they want to. I know a chartered accountant who is 84 and goes to work every morning because he enjoys it.

Lenders such as Advantage have displayed great foresight in recognising that ageism is something that needs to be tackled. I can remember when lenders started to lend to people over 60 and now this has risen to 65. No doubt the age limit will increase further.

The European Parliament has also introduced rules that mean people can work longer. This, coupled with the slide in pensions in this country, means that some people are working until they are 75 and have enough money to put towards their mortgages.

Advantage is not doing anything new by lending to the over-65s. Companies such as Abbey have already been doing this for years. And other lenders such as Halifax do not have a maximum age limit on who they will lend to.

Older people who want to release money find themselves in a tricky predicament. If they choose to use equity release they are slated and if they choose a long life-type mortgage option they are also criticised.

People who criticise lenders for lending to the over-65s should do their homework. If a person can afford to borrow a given amount there is nothing wrong in allowing them to do so.

Ray Boulger is senior technical manager at John Charcol

I have no doubt that the average age of mortgage borrowers with normal residential mortgages will increase for the foreseeable future, partly because first-time buyers are not getting any younger and partly because the average retirement age in this country will increase.

The growing popularity of buy-to-let, where age is no barrier, will also increase the average life of borrowers, as will the increasing number of people taking out lifetime mortgages.

As far as normal residential mortgages are concerned, recent anti-ageism legislation – which is likely to be beefed up before long as a result of European Union pressure – plus increasing longevity and a higher statutory pension age will all contribute to borrowers wanting or needing to retire later in life.

Most lenders still assume that employed borrowers will retire at the age of 65 and the self-employed at either 65 or 70. This is increasingly unrealistic and lenders need to review their criteria.

If a potential borrower states that they intend to work until, say, 75 but the lender’s maximum age criteria restricts the loan term, there could be an argument that this contravenes the age discrimination legislation and is not treating the customer fairly. After all, if a prospective borrower says they plan to work until they are 75, would the lender want to call them a liar?

But lenders have a difficult judgement call to make when it comes to the maximum age to which they will lend based only on earned income. Encouraged by ambulance chasers and others, there is a concern that borrowers who say they are going to retire at 75 may subsequently claim they always intended to retire earlier. This risk can be managed with proper documentation.

Recommended

Enterprise appointment

Enterprise Group has promoted Mark Lovelock to director of corporate accounts. Lovelock has been with the firm for four years, first as regional business development manager and then as head of corporate accounts.

Personal Touch launches Platform tracker

Personal Touch Financial Services has launched of a self-cert two-year semi exclusive tracker funded by Platform, the intermediary lender of Britannia. The tracker is available across three LTV bands up to 90% LTV and rates start from 5.50%, a free valuation applies and an arrangement fee of £599 can be added to the loan. The […]

Faster conveyancing with Evaluate

Primrose and LMS have formed a partnership to provide intermediaries using the Evaluate online system with a streamlined conveyancing process.Last week Primrose launched a 99 valuation and legal fees deal to coincide with Evaluate’s official unveiling.By integrating its systems with LMS, Primrose says all remortgage applications entered into Evaluate will automatically be transferred to an […]

Lender unease over Shah’s wooden homes

Newspaper publisher and author Eddie Shah is building 44 environmentally-friendly wooden lodges that he says will save 60% of the cost of running a house.The three and four-bedroom lodges, set to be completed by August 2007, can only be used as second homes. Sizes vary and prices range from £198,000 to £265,000.The lodges’ green credentials […]

Newsletter

News and expert analysis straight to your inbox

Sign up