Offering their view in this week’s Market Watch are:
Ken Durkin, director of Independent Financial Choices
“Age discrimination in mortgages is as unacceptable as turning down applications over race or gender.” [pg.2]
Andrew Montlake, communications director at Coreco
“Retiring at 65 will become the stuff of nostalgia; upper age limits in lending must be abolished.” [pg.3]
Gemma Harle, managing director of Tenet Lime
“Rising trend from lenders does not reflect changes in society or working lives.” [pg.4]
Ken Durkin, director of Independent Financial Choices
I read in the press recently that Nick Clegg is concerned about racial discrimination by lenders. I think we need to broaden this concern to include one that is currently most blatant, that of age discrimination.
I believe banks and building societies are guilty of age discrimination in the mortgage market.
The evidence for this is that all lenders have as one of their criteria an upper age limit of 75 and this situation bears no relation to a customer’s asset value or the ability of the borrowers to service their borrowing or repay the mortgage at some future date.
In many cases, the income of people who receive pensions is the most secure income available at this time.
As an example, a married couple with a combined pension income in excess of £60,000 a year would not qualify now for the interest only mortgage I secured for them 12 months ago, purely because of their age.
Age discrimination in the mortgage market is an issue I am devoting some time to.
I find it unacceptable to be involved in a situation where I have to sit with clients and tell them that they cannot obtain a mortgage because of their age.
It is as unacceptable as having to tell clients that the lender will not accept applications from them because of their skin colour or their gender or state of health or because they are confined to a wheelchair. A person’s age should not appear in any lender’s criteria.
The quickest way to root out this iniquitous discrimination is to discover the source of this policy. Let the people who are responsible be accountable.
Andrew Montlake, communications director at Coreco
The issue of age and retirement ages is an emotive subject and one that I believe many lenders have got wrong.
This is a time when people are working longer, in a vast array of different jobs that do not need to match outdated stereotypical retirement ages.
Whether or not you believe that this amounts to age discrimination is up for debate.
However, I see no reason why under “normal” criteria, lenders cannot abolish the age limit to those who can demonstrate ongoing affordability and a plausible strategy to pay off the mortgage at the end of the mortgage term.
The strangest part of all of this is that, whilst many are striking and marching all across the country in response to pension cuts that mean everyone will have to work longer, many lenders still see age 65 as a cut off point.
If a normal mortgage term is 25 years, by the time this comes to an end, a retirement age of 65 will be looked upon with a touch of nostalgia.
Medical advances alone mean that a growing population above the age of 65 will be more able to work. Changes in the way people actually do that work, with more technology and the ability to work from home or anywhere in the world, means that current rules on age look more than a little anachronistic.
I know there are exceptions, but on the whole lenders make no allowances for the type of job people do. A builder working over the age of 65, (although I know a few), is less likely than a writer or a lecturer to continue working past the age of 70.
For me, this is all hardly treating customers fairly.
An upper age limit should be abolished and some sensible underwriting should take place in each case. If affordability can be demonstrated, income proved and sense checked, then age should not be the deciding factor.
If still concerned, lenders could always take assignment of a mortgage protection policy – now there’s a thought.
Gemma Harle, managing director of Tenet Lime
With many people having to work longer and buying homes later, there is a disconnect between the average age of a borrower and the age until which lenders are prepared to advance money.
It’s a trend that has accelerated since the credit crunch.
On the one hand, you can understand lenders’ reluctance. Our ageing population is a journey into the unknown and the current economic climate will make that appear even more perilous.
Lenders need to determine the balance between knowing the intended age of retirement and assessing the affordability of a mortgage once the borrower has retired and their income has changed or reduced.
Nevertheless, it is discriminatory, as it removes the choices available to older borrowers – forcing some into taking out an equity release product when they could otherwise have borrowed with a better-value mortgage.
This is another example of underwriting criteria not reflecting the real changes in society and our working lives.
The reality is that this approach to lending reflects general economic concerns, funding challenges and balance sheet requirements, rather than a considered view of lending to an ageing population.
If an ability to pay underpins a decision to lend then clearly, in many cases, older clients would easily qualify for more mortgage lending and not to offer it is unfair.
The difficulty is where there is not enough evidence of this and future earnings are in question.
Many 50- and 60-year-olds with interest-only loans or high LTVs will struggle to take debts into retirement unless they embrace an equity release scheme.
As economic conditions improve, lenders will gradually revise this approach as they become more confident about our aging society, but do not expect this to happen quickly.
