Why banks and building societies should be lending to the over 50s

Following the introduction of new lending rules in April 2016, under the Mortgage Market Review (MMR), many banks and building societies have refused to offer mortgages to homeowners in their 50s or older. 

Various banks and building societies have set a maximum age beyond which they won't allow a mortgage to run, despite clear evidence from applicants that they can afford their repayments, even after they retire.

Last September, a survey from mortgage brokers' organisation the Intermediary Mortgage Lenders Association (IMLA) revealed that four out of five brokers are seeing lenders cut the amount they're prepared to lend.

It has been reported that Linda Woodall of the Financial Conduct Authority (FCA) has told a Council of Mortgage Lenders conference that the rules are being misapplied, and promised to examine lenders' policies more closely.

This is causing a problem for many of the over 50s who want to borrow to move home, or invest in buy-to-let property. A high proportion of borrowers in this age group are either still working, or have stable pension income and are arguably in a better position to pay back a mortgage than younger borrowers, with dependent children. 

Record numbers of pensioners are working into retirement, according to the Office of National Statistics.  As many as 1.2 million people aged 65 plus are still earning into their 70s.

There was no increase in the number of older workers through the bulk of the 1990s, but the numbers have tripled since 2002.

Thankfully in the latter part of 2016 and into 2017, there has been a wider choice of lenders offering attractive mortgage deals for the over 50s. Due to this we have been able to fulfil a much higher percentage of these mortgage requests.

As the UK population is getting older, I believe mortgage demand for the over 50s is going to continue to grow. With the retirement age set to rise over the next few years, many older borrowers will be working well into their 60s and beyond. 

Though many of the large banks and building societies won’t lend to this age group, there are thankfully a few niche and bespoke lenders that will know consider lending up to the age of 85.

*Darren Pescod is Managing Director of The Mortgage Broker