As a nation, we’re living longer and we’re working for longer too. But, when it comes to applying for a mortgage, the older generation can often find themselves shut out in the cold.
According to the Office of National Statistics (ONS) the proportion of working individuals aged 65 and over has almost doubled since records first began in 1992. Last year, during the period for May to July there were 10.4% (1.19 million) aged 65 and over in employment, almost double the figure reported for the same period 15 years ago.
Young enough to keep working, but too old to get a mortgage?
A possible factor contributing to the rise in employment among people aged 65 and over could be the legislation that came into force in October 2011, stopping employers putting employees into compulsory retirement when they reached the age of 65.
The ONS predicts the aging workforce trend is one that is set to continue, suggesting the economy may come to rely increasingly on older workers by 2039. And yet, the over 60s remain deemed as a high risk category to so many lenders. Why is this?
The primary risk factor is based on an assessment of ability to continue making repayments right up until the end of their mortgage term. This combined with the fact it could be tricky to predict or prove how their financial situation may look during the transition phase from having a regular salary through to living from a pension pot in the future.
In 2014, the Financial Conduct Authority introduced a new set of lending rules under the Mortgage Market Review (MMR). These guidelines were put in place to prevent excessive borrowing and to ensure borrowers would be able to afford loan repayments in line with interest rates. Lenders began applying even more scrutiny when assessing their customers’ finances, and this left older would-be borrowers at a disadvantage, faced with a reduced choice of mortgage providers and products. As a result, people over 60, and even those in their 50s and 40s, were finding it harder than ever before to secure themselves a mortgage.
A Retirement Mortgage Programme where you can’t be too old to get a mortgage
At Ipswich Building Society, we’re proud to be different. All of our mortgage products are available to those in retirement, and we now have no upper age limit for borrowers. We manually check every application when assessing affordability and our Retirement Mortgage Programme means we’ll accept 100% of a borrower’s pension as well as a proportion of other forms of income, such as investments, when assessing affordability.