Why are older mortgage borrowers still under-served by major high street lenders? – Nimmo

Real applications that were all accepted by our underwriters are summarised below. But all were turned down by the big six lenders. What we find particularly depressing is that we conducted a similar exercise almost 10 years ago and the major lenders’ attitudes remain pretty much unchanged.

It is extraordinary that in today’s financial climate and with Consumer Duty emphasising the need for products to meet customers’ needs, the major lenders are still discriminating against older borrowers purely because of their age. This is where an intermediary can play a vital part in providing a wider range of borrowing options from building societies like us that offer mortgages to those coming up to and in retirement. If they can afford the contractual monthly payments, why are the major lenders turning these people down?

In our experience, these borrowers, many of whom have solid pension pots, are much more secure than those of working age, who could be made redundant with little warning. Indeed, we will lend a five-year interest-only mortgage to an 89-year-old, but only if it is affordable.

The requests made by our mystery shoppers were for a 10-year term for a mortgage with a five-year fixed rate, a two-year fixed rate or discounted for the first two years. However, all were rejected by Lloyds, NatWest, Barclays, HSBC, Santander and Nationwide.

Most requests were rejected on the grounds of age or only considered on a much-reduced mortgage term so the borrowing would end at the lenders’ upper age limit. This significantly increased the monthly payments and negatively impacted affordability.

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In the meantime, the Financial Conduct Authority (FCA) has promised its second summer review this month on the future of the mortgage market and conduct regulation. We understand that the review will be a wide-ranging paper “on the future of the mortgage market and conduct regulation.” One of the areas the review will cover is the increase in demand for later life lending.

We are clear, as are the brokers that bring cases to us, that borrowing in later life will become increasingly mainstream, rather than a niche area. So why don’t the big six believe this?

The following scenarios were used in the survey:

Scenario 1

Husband, 84, and wife, 67, both retired with pension incomes totalling a joint income of around £60,000 – pension and savings. Clients had previously lived in Kent, then moved to York, and are now moving back to Kent to be near family. Previously unencumbered, they now need a joint mortgage due to higher property prices in the South East. They require a five-year fixed rate repayment product on a 10-year term. The mortgage amount is £85,000 and the property value is £518,000. The loan to value (LTV) is 16.41%.

Scenario 2

A single woman aged 71 would like to remortgage her encumbered property to gift to her mid-20s granddaughter. Her income is from a pension and is £33,000. She requires a two-year discounted repayment mortgage product for a 10-year term. The mortgage amount is £84,000 and the property value is £330,000. The LTV on this is 25.54%.

Scenario 3

Married couple aged 68 and 74, both retired, both have incomes from their pension totalling £59,000. They are currently renting after moving back from abroad and want to purchase a property in the same area. They are looking for an interest-only, two-year fixed rate product for a 10-year term. The property is priced at £1m and the LTV is 10.5%. They would like to borrow £105,000.