Waking up to the midlife mortgage crisis – Diamond

Those with more complex sources of income, those that didn’t meet the traditional lending criteria of high street banks and those who were being turned down despite having sufficient affordability.

By serving the over-50s, we were already catering to a lower minimum age than many lenders operating in the later life space. We recognised that many people in their early 50s were too young for products like equity release but had complex circumstances that prevented them from securing a high street mortgage.

But since then, things have changed. We’re all saving less in banks and investing in a wider array of assets. Fewer people have private pensions, and the state pension age is continuing to increase. The gap between inflation and wage growth is growing. We’re all going to be working longer, and some of us may never retire at all. 40% of new mortgages now have terms that extend beyond a borrower’s pension age, and of those 40%, it is those in their 40s make up the biggest group.

It’s a midlife mortgage crisis and the industry needs to catch up.

And it’s not just mortgages that those in their 40s must contend with – it’s financial strain. The Office for National Statistics (ONS) reports that divorce rates peak in the 40s for both men and women. Over half of ‘sandwich carers’ – those caring for sick, disabled or older adult relatives as well as dependent children – in the UK are aged 45-64. And this is also the age at which many parents start supporting their children through university. Forget 50s or 60s; for many people, life becomes financially difficult at 40.

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Add a history of adverse credit, self-employment (the average age of the UK’s self-employed workforce is 48) or non-standard assets, and securing a mortgage can be as difficult for someone in their 40s as in their 70s. They are branded a ‘complex case’ that doesn’t fit with standard criteria. And yet, these are not unusual circumstances. This is not a niche issue.

Financial pressures start younger

That’s why we’ve recently lowered our minimum age limit to 40 to reflect how financial pressures are growing for this age group. Our expertise in problem-solving complex cases for the over-50s can be just as easily applied to help these younger borrowers. Supported by LiveMore’s Mortgage Matcher® technology – which instantly generates a snapshot of a client’s current and future affordability – and our team of underwriters ready to think outside of the box, we can help brokers find a solution for clients they might otherwise turn away.

Our finances are becoming more complex and a one-size-fits all approach no longer works for mortgage lending in midlife and beyond. Income streams can change and fluctuate up to and into retirement. A borrower’s affordability will not be consistent over time – dependants leave home, pensions mature, inheritance is passed down. What might seem to be a complex case on paper could have more than adequate affordability with the right outlook.

The industry needs to adapt to reflect the realities and pressures of real life, not outdated criteria.