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Older borrowers

By Mark Robinson
Chief Executive

Mark Robinson gives his market thoughts for the month.
  Press Office

Contact: Louise Bunce
Head of Sales & Marketing

Tel: 01858 412669
Fax: 01858 412254
Mobile: 07889 708249

Email: Louise Bunce
Email: Press Office
Web: www.mhbs.co.uk
 
June 2015

We are a very different generation from our parents. The old pattern of buying a first home at 24, paying off the mortgage by age 50 and then retiring at 65 is going. Instead we are working longer, getting divorced in our 50's and carrying debt into retirement. A million reitirees now have outstanding mortgages. The next generation better watch out as inheritances are mortgaged or used to fund long term care.

This change in behaviour grows out of a combination of longer life expectancy and less secure pension provision, as defined benefit schemes dry up. The result is that the purpose of mortgages is also changing; thay are now seen as facilitating a lifestyle rather than buying a home.

The extent to which a lender is ready to embrace these new needs is varaible. Age defined products abound and recently HSBC was criticised by the Financial Ombudsman in a case where a customer was refused a mortgage on the basis they would (likely) retire during its term. However a pension is, arguably, a more dependable source of income than a salary. An afforable mortgage is an affordable mortgage. 

Where things get even trickier is where a mortgage needs a level of income which won't be met in retirement. With the removal of an enforceable retirement age, the date of stopping work can be very important. Lenders will have to assess whether, for example, a roofer or antiques dealer can credibly work until they are 75. Needing or planning to work is very different from being able to. Lenders' upper age limits try to address this but are rather arbitrary.

The other matter inhibiting lenders is fear of being accused of misselling. A clear headed 62 year old may make great decisions about a mortgage. Fifteen years later the rationale for that decision may be lost- to them and others. We'd do well to heed age charities who urge all of us to set up powers of attorney in our prime. Even well documented advised sales may be under attack where customers are vulnerable.

In summary the situation is none too satisfactory; customers want solutions but lenders are wary. Watch this space as work in this area develops in the next few years.

 mrobinson@mhbs.co.uk
 
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