The world of mortgages continues to change on a regular basis and lending criteria is an area which is extremely fluid. Historically, anyone over 50 would probably struggle to secure a relatively long-term mortgage due to their “impending retirement”. Today, the UK government has effectively removed statutory retirement dates which has meant the UK mortgage industry is in a process of catch-up. So, what are the chances of securing a mortgage when aged over 60?
It will come as no surprise to learn that the 2008 financial crisis changed the way that many mortgage lenders evaluate their customers. Bank balance sheets were stretched, economies were struggling and even 12 years later governments are still paying off debts from the crisis. The UK government also announced strict criteria with regards to mortgage lending and a requirement that banks differentiate traditional banking from what has been termed “casino banking” in the shape of investment/corporate banking. When you add in the ongoing coronavirus pandemic it is inevitable there will be liquidity issues in the short term.
While historically the UK mortgage industry seemed to ignore the financial power and the experience of those over 60 and looking to acquire property, things are changing.
Flexible lending criteria
If you take a step back and look at the historic criteria from a distance, it is understandable. Those looking to take out a traditional mortgage in excess of 20 years may struggle if they leave it until their late 40s. How might incomes change as people approach 60? How might expenses change as people move towards retirement? So, while some suggested this historic type of inflexible lending criteria was “ageist” it is not necessarily the case.
Today we see the likes of Nationwide and Halifax increasing their age limits to 75 and even 80 for traditional mortgage products. Traditional mortgage providers now seem to more appreciate not only the prolonged employment of employees in their later years but also the assets many have accumulated over their lives. So, while many people felt as though they were physically cut off from the workplace when approaching retirement this is not the case today. Change in the mortgage industry is slow and often difficult but there is change.
Perhaps one of the major steps in recent years has been the introduction of what has been deemed the “anticipated retirement age” of borrowers. We also know that trends have changed and many people in their 50s, 60s, 70s and over are regularly acquiring property. This may be for family members, investment purposes or simply moving from rented accommodation into their own property. So, how do modern day mortgage lenders accommodate the government’s income criteria?
The criteria ensure those who take out mortgages from traditional lenders will need a certain degree of income and assets. So, we are now in a situation where the traditional retirement ages of men and women have been consigned to the dustbin. Lenders will now look at a borrower’s “anticipated retirement age” and expected employment income. They will also take into account other income streams such as investments, pensions, etc.
In years gone by private banking was deemed to be for the “rich and famous” but there have been significant changes of late. While still secretive to a certain extent, and often invitation only, private banks are now more mainstream than ever before. We regularly hear of private banks accommodating borrowers in their 70s, 80s and very often their 90s. There will obviously need to be a degree of security with regards to assets and income but in the modern age, age is not a handicap. Let’s not forget, many of those drawing pensions today will be tied to lucrative old final salary schemes which are a distant memory for many in their Thirties and Forties and those just starting their careers.
So, while many would suggest that borrowing criteria has tightened somewhat for those in their older years, it is not always the case.
Utilising assets and income
While there is a need to utilise both assets and income, in order to maximise borrowings, this must be done in a sensible manner so as to not overstretch finances. If we take a step back and look at the situation from a distance, all a mortgage lender requires is a degree of security and a degree of income. The greater this “insurance policy” the more likely you would be able to secure borrowings at a competitive rate. When it comes down to it, borrowings, investments or any other similar type of transaction simply come down to the risk/reward ratio. The greater the risk the higher the interest rate, the lower the risk the lower the interest rate – it isn’t rocket science.
It is all good and well having an array of assets such as paintings, property, vintage cars, etc but when looking to secure additional borrowings, these can prove extremely useful with relatively little risk. Let’s not forget, when acquiring a property it is unlikely you will be able to secure an LTV ratio above 75% which in itself gives mortgage lenders a significant degree of security in the event of financial difficulties (they will hold a charge over the property). Even in the midst of the 2008 depression, as many people have called it, house prices in the UK fell nowhere near 25%.
There are mortgage brokers and financial advisers ready and willing to offer you an array of advice on mortgage borrowings. If you have a complex financial scenario or perhaps you are in later years and have limited employment income, then a mortgage broker might be the best port of call. They will have access to not only traditional borrowers across the UK but also private banks many of which are invitation only. The ability to introduce a significant degree of competition amongst different borrowers will improve the chances of securing funding and also the chances of securing very competitive terms.
While there are still some challenges when looking at mortgage borrowings in later years, these have certainly receded in recent times. Those looking to secure a mortgage aged over 60 have a good chance of success if their finances are in order. Thankfully, ageism is nowhere near as big a problem today as it has been in years gone by as lenders switch their focus to income streams and assets available as collateral.