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Mortgages and older homeowners

Journalist: Emma Simon, Mortgage Strategy

ended 22. May 2024

Thankyou for all the comments on previous alerts. I'm doing another article for Mortgage Strategy on later life lenders - so looking for comments from brokers, advisers and advisers about this area. 

The main issues I'm looking to address are: 
 

  1. Is the mortgage market working for older homeowners - particularly in regards to the maximum age limits? Is this restricting borrowing for some? 
  2. Are some older homeowners forced to move onto more expensie SVRs because of this - rather than being able to access cheaper fixed rate deals? Are other downsizing etc?
  3. Is there a gap in the market between RIOs and lifetime mortgages (equity release)? What are the pros and cons of these two? Are some borrowers not effectively served by either? 
  4. Could longer-term fixed rate mortgages provide an effective alternative? 
  5. Do intergeneratioal mortgages or the Japenese model work in the UK market? 
  6. What would you like to see lenders / regulators do to help improve choices and options for older homeowners?

Thankyou very much. Looking for comments by end of play Wednesday 15th May 

 

 

6 responses from the Newspage community

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Ben Perks
Managing Director at Orchard Financial Advisers
There is a huge amount of innovation needed in this area as it is a rapidly growing market. The options available to older mortgage borrowers have undoubtedly improved over recent years, but there is a long way to go.
Let's face it, a 60 year old today is significantly different to a 60 year old in the nineties. The baby boomer generation dont want to downsize and live a modest quiet existence. They want to keep working, socialising and holidaying. They are fit, active and healthy people that are happy to keep the mortgage going.
In recent years, the Covid pandemic and the cost of living crisis have left many older borrowers carrying debt for longer and plans to repay may have been derailed. There need to be better solutions available to the more senior borrower.
Yes, there are RIOs and Lifetime Mortgage options, but we need more mainstream lenders that will take a versatile approach to income and show a willingness to lend into later years.

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Simon Bridgland
Director at Charwin Private Clients
Mortgages become unaffordable due to maximum ages limits, so clients have to endure harsh SVRs as existing lenders wont give new lower rates, leaving clients having to downsize. This is both difficult, if in a small property, or worse, suffering isolation as moving away from friends and family.
RIO’s are restrictive, as having affordability based on one income discounts it for many, so lifetime mortgages can offer a lifeline, but this can fall down on maximum LTVs. Some lenders are trying to bridge the gap by taking into account a regular monthly payment but at present this doesn’t go far enough.
The idea of Lifetime fixed rates would only help if lenders became more generous.
Intergenerational mortgages wont work in the UK as this isn’t a socially engrained way of thinking so take up would be minimal. UK nationals don’t generally live with parents unless they have to.
I would like to see lifetime mortgages with mandatory payments for those with affordability, increasing LTVs.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
The maximum age limit on traditional mortgages from most lenders offers decent flexibility in our view. We've had several clients retire in their 60s whilst still having mortgages in place that will run until their mid 70s. They are comfortable with this as it's built into their financial plans, and because the term has been extended, the lower monthly payments have allowed them to spend on other things that are important while they have the health and time to do them. It's gradually moving away from the obsession with paying the mortgage off as early as possible as people realise that life is short and unpredictable - too many sacrificed made today may not lead to the rewards we expect in the future if health detiorates etc. It's all about balance.
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Mike Staton
Director at Staton Mortgages
Never before has the meaning of the french translation to "Mortgage" rang so true, "Death Pledge". With interest rates and house prices as they currently stand, we are seeing more clients wanting extend their term with little thought about their financial future. This is going to lead down the route of destruction for generations as people make serious life decisions based on putting food on the table now. Unfortunately, social media has created a monster where people want to portay a wonderful life in pictures whilst the posters are paying little thought to the ramifications of the financial decisions they are making now. A lot of people do need to downsize but are refusing to do so out of fear of what people will think on social media about them. What happened to the days where you put a foot on the housing ladder instead of jumping on a trampoline to see how high you can reach in one leap. I blame social media for this!
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
It is always surprising to me how many people I speak to who feel that they cannot get a mortgage, or at least an affordable mortgage, because they are over 50. Most lenders are now offering mortgages up to age 70, with some stretching to 75 and a few even considering mortgage terms up to age 85. This flexibility recognizes that borrowing needs (and some people!) don't necessarily stop at traditional retirement ages. Affordability assessments consider borrowers' income sources, expenditure, and credit profile. Lenders want to ensure repayments remain manageable throughout the mortgage term; this may mean looking at your job role and feeling comfortable you can continue beyond age 70, or looking at applicants' pension provisions to see that they have an income that does not rely solely on their ability to work. All of this means that, for many people, there is a lot more mileage in a traditional mortgage than they realise, before having to look at RIO or lifetime options.
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John Tilzey
Sales Director at finova
A gap exists between RIO and lifetime mortgages leaving some borrowers underserved. RIO products help those with IO mortgages who can’t qualify for standard loans, with lower interest rates, higher LTVs and a fixed rate for life. However, consumers must pass affordability checks based on retirement income, necessitate ongoing payments until death/long-term care and risk repossession for missed payments. Lifetime mortgages, while having higher interest rates and lower LTVs, offer advantages such as voluntary payments, no repossession risk for missed payments and no affordability checks. Given the pros and cons, there is a clear need for more product innovation from lenders to meet borrowers' needs. For example, Standard Life’s Horizon Interest Reward product offers a lifetime product with characteristics of a ROI allowing a reduction in its lifetime interest rate for a period. Products that allow flexible movement between RIO and lifetime products upon a life event could bridge the gap.