Building societies to review age cap limits on mortgages
A report by the Building Societies Association (BSA) assessing how mortgages can be tailored to better suit the needs of older borrowers, released to the Sunday Times, outlined a strategy for borrowers at the ‘top of the ladder’.
Working with the Financial Conduct Authority (FCA) and the Treasury to encourage innovation among lenders, the BSA wants to see a range of mortgage options for ‘right-sizers’ and ‘last-time buyers’.
Speaking to the Sunday Times Paul Broadhead, head of mortgage policy at the BSA, said if the industry did not start to consider now how demand for a mortgage might change it would risk having a large group of people whose financial needs were not met.
He said age restrictions not only affected borrowers close to retirement looking to move but also first-time buyers as people buy a starter home much later in life.
“There are some whose first house will take them beyond the state pension age,” said Broadhead.
“If the loan for your first property, which is never where you’re going to end up, is taking you beyond the age of 65 then it really starts to bite when you get to your second or third home.”
As part of the review, mutuals will review affordability assessments and the inclusion of pension income.
Further action points include work with insurers on policies to mitigate the risks perceived to come with lending to older borrowers such as the cost of residential care and the possibility of memory impairment.
The BSA plans to develop a guide for older borrowers which will cover topics such as age restrictions, power of attorney, pension freedoms and equity release.