Britain’s biggest mortgage lender has decided to increase its age limit from 75 to 80 as it adapts to an ageing population.
The change will be introduced by the Halifax next week in response to shifting “demographics and working habits”, The Times has learnt.
It means that for new applications the mortgage term will be allowed to run until the borrower’s 80th birthday. Scottish Widows, which is also owned by Lloyds Banking Group, will bring in the same rule.
Many older borrowers have encountered difficulties getting approval for a mortgage because the largest banks have strict rules on lending into retirement. At present only building societies lend to people over 75.
Simon Collins, of John Charcol, a mortgage broker, said that the Halifax’s move was a “logical progression” as it was estimated that a quarter of the population would be 65 or older by 2034. “We are living longer, we are having to work longer, therefore we are going to have to borrow for longer,” he added.
Advertisement
Until now, many lenders have given mortgages only up to a planned retirement date. Middle-aged borrowers are penalised with shorter terms, which cost more, or face being turned down. Older borrowers are often considered to be asset-rich but income-poor.
Mr Collins said that some banks may have been reluctant to lend to older people out of fear of possible harm to their reputation. “Banks do not want to be seen kicking granny and granddad on to the street if they haven’t paid the lenders,” he said.
Aaron Strutt, from Trinity Financial, a mortgage broker, said that building societies had been inundated with buyers aged over 65 who had been turned down by the big banks.
“People are coming to the end of their mortgage terms and they are not qualifying for another and this has angered a lot of borrowers,” Mr Strutt said. “If you are 65 and after a relatively large mortgage but can only get a five or ten-year mortgage term, then lenders will only put the mortgage on a full capital repayment basis, which makes the monthly repayments unaffordable.”
Lenders have been under pressure to ease restrictions as Britons live longer and the state pension rises. First-time buyers are also getting on to the property ladder later: the average age of a first-time buyer is 31, according to the Council of Mortgage Lenders, meaning that many borrowers face repaying their loans at a more advanced age than in previous generations.
Advertisement
The government has also been urging change. Baroness Altmann, the pensions minister, called for better protection for older people seeking mortgages last year, saying that some borrowers were facing “age discrimination in the mortgage market”.
Older people may also want to raise money on their property to help their children or grandchildren to buy their own home. Halifax’s decision comes days after Barclays announced that it would offer a 0 per cent mortgage deposit as long as a “helper”, such as the buyer’s parents, made a 10 per cent contribution to the house price. Research by Legal & General has revealed that the “bank of mum and dad” is now the equivalent of a top-ten mortgage lender, with parents likely to be involved in a quarter of property transactions this year.
In November, 44 building societies pledged to review their age limits for borrowers as the population grows older. The Building Societies Association said that “borrowing into retirement is becoming increasingly commonplace, rather than a niche form of lending”.
The change in policy from Halifax and Scottish Widows is subject to conditions: over the age of 70, borrowers will only be able to use pension or investment income to qualify for the maximum age of 80.