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Lending and borrowing for retirees must be carefully managed – TMA

by: Gary Little, commercial director, TMA Mortgage Club
  • 19/07/2016
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Lending and borrowing for retirees must be carefully managed – TMA
With lenders increasing the age limit for mortgages to 80 years and even 85 in some cases, it shows that the industry has become very mindful of our ageing society.

As a nation we’re leaving milestones like homeownership  until later in life, and mortgage lenders have clearly recognised this shift, with some customers still making repayments at the age of 90.

While is it good to see that these older borrowers haven’t been abandoned, many mortgage terms now go beyond the state retirement age. As a result, it is becoming increasingly more important to look at clients’ individual financial circumstances.

After all, there are different risks that apply to older borrowers, so careful management and stricter practices will need to be put in place for this group. For example, it’s vital that any customers taking out mortgages where the term will extend into their retirement have a sufficient income in place to meet the repayments later in life.

The truth is that the combination of a limited state pension and a lack of savings can leave many people short of cash in their retirement. As a result, borrowers in their eighties may have insufficient income to meet their payments.

It is therefore important that lenders’ affordability models are able to maintain responsible lending. Borrowers will need to be treated on a case-by-case basis, with special attention paid to their pension income, the amount of equity held in any existing property and the sources of income used to support the application.

It’s exciting to see that older borrowers have more options thanks to greater innovation in the market. However, it’s still vital that lending is conducted in a responsible and sensible manner, regardless of the age of the borrower.

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