Age is a sensitive issue for many and it certainly seems to be catching up faster than I, for one, would like. Hangovers are longer and more arduous and keeping fit without all the niggles that go with it is unquestionably getting tougher and tougher.
If this wasn’t bad enough, financial constraints also appear to be following us into retirement and beyond.
Figures from the Office for National Statistics show that the number of people working beyond the age of 65 has risen at the fastest rate since records began in 1992. Financial pressures are cited as the reason why an additional 40,000 people in Q2 2010 felt unable to retire.
In addition to this, nearly 250,000 people over state pension age now have unpaid mortgage debt, according to an English Housing Survey by the Department of Communities and Local Government (DCLG).
The survey also states that more than half of all homebuyers aged over 50, many of whom retired early, also have mortgage terms that stretch beyond 65 and two-thirds of these say they intend to remain in debt indefinitely.
With affordability remaining a huge issue for many potential borrowers, there is nothing to suggest that this trend is going to go away. As such, growing numbers of people are having to cope with significant financial responsibilities after reaching the ripe old age of 65.
When it comes to mortgage lending into retirement, the tightening of the vast majority of lenders’ criteria has led to it becoming increasingly difficult for older people to borrow. Inevitably because of these extra regulatory and responsible lending pressures, providers need to have robust processes in place to ensure that the mortgage will be affordable beyond retirement age.
Indeed, in its recent Mortgage Market Review consultation paper the FSA said that, where the loan term extends into retirement, it now wants lenders to assess income into retirement to ensure the mortgage remains affordable.
the regulator stated that while it recognises it is difficult to predict pension income, this could be done by confirming that the applicant has a pension provision, confirm the details and take a view on the mortgage remaining affordable into retirement.
Of course in an ideal world, most of us would undoubtedly prefer to have paid off the mortgage well before retirement, but it’s evident that this remains a pipe dream for far too many.
However, this also means that the potential is there for advisers who are fully aware of the benefits and the pitfalls for the older generation who are looking to refinance.
Whilst most brokers automatically take into account any income into retirement before even approaching a lender, they also have to take into account pension provisions, retirement age and the nature of their employment.
As the regulatory grip tightens so must the advisory process and ensuring that clients have enough regular income when passing the age of 65 is essential.
Securing the right deal however can be another matter.
Generally speaking, the more mainstream mortgage deals have much lower interest rates than equity release schemes or home income plans but these may be the right option for the right clientele in the right scenario. As such, the quality of advice in this period of people’s lives is as important as for a first-time buyer stepping onto the property ladder.
It’s clear that people are living longer and carrying more debt burden with them. The quality of advice will help these clients to not only maintain a roof over their head, but also allow them the opportunity to really enjoy their elderly years without too many financial worries hanging over their heads.
Martin Wade is director at Your Mortgage Decisions
