When the final version of the Mortgage Market Review rules were published, the emphasis on the lender to assess affordability pre and post retirement led to many lenders running scared from anyone who would be over 65 before the mortgage term ended.
It is an attitude which, put bluntly, has to change.
The first sign of borrower push back is the landmark decision of the Financial Services Ombudsman which ruled against the HSBC after it declined a mortgage application from a couple in their 40s because one of them would be over 65 at the end of the term of the mortgage.
It its ruling, FOS said: “The bank relied on untested assumptions, stereotypes or generalisations in respect of age.”
HSBC was ordered to pay compensation of £500 to the couple and must also reconsider the application.
It was the first time an age-related complaint had been upheld by the ombudsman.
This week our panel of experts will consider the issue of age discrimination in mortgage lending, why attitudes need to change and what the regulator’s role is in the debate.
Dominik Lipnicki, director, Your Mortgage Decisions, considers the realities of modern day living and how lenders’ criteria is failing to cater to these needs.
Peter Williams, executive Director of Intermediary Mortgage Lender Association (IMLA), says lenders have a difficult balancing act to consider but further guidance from the FCA will help to settle any outstanding concerns.
Andrew Montlake, director of Coreco, says the idea of imposing age restrictions is outdated and support from the FCA is needed to change lenders’ policies.
Dominik Lipnicki 
is director of brokerage Your Mortgage Decisions
I’m afraid this is far from an isolated case. Discrimination is alive and well in this arena with lenders prejudging affordability based on stereotypes and assumptions rather than individual circumstances and facts.
For example, it is not unusual to see income multiples reduce when borrowers have children even though smoking can cost just as much.
Many lenders also only offer mortgage terms that last until the traditional retirement age which is seriously outdated in the current climate. As we all know, working beyond the traditional retirement age has been normalised in today’s economy and more and more of us are choosing to work longer. These people should not be assessed by their birth date alone.
Sadly most lenders are seeking the same clients rather than expanding their horizons and adapting to the demands of modern day borrowers. This leaves far too many people as mortgage prisoners and too many people are unable to get a competitive deal.
Lending criteria could and should be more intelligent than it is at the moment. Being risk averse is one thing but ruling out potential clients based on generalisations is not healthy for the lenders, the clients or the market.
Let’s hope that this ruling by FOS will get the lenders thinking more constructively about how to engage better with the assessment process. We will all benefit from a more focused and well informed system that considers the realities for individuals rather than assumptions of group behaviours.
Peter Williams is executive Director of IMLA
Lending into retirement is a growing issue for lenders. They must try to balance off a clear market need with the conduct risks associated with both assessing income in retirement alongside the constraints now in place regarding the sale of interest only-products (a common lending into retirement product).
The FOS decision regarding an application HSBC received in 2012 has highlighted the tensions. HSBC refused to consider an application for an interest-only mortgage because Mr A would be over 65 years old at the end of the proposed term. It suggested it would consider an application for Ms B alone, or if the term was reduced by 10 years, or if it was on a capital repayment basis.
Recently Linda Woodall, director of mortgage and consumer lending at the FCA, said that where consumers had not yet retired, the FCA expected lenders to consider whether they were likely to be able to afford the mortgage if it extended into their retirement, based on what the lender knew when they were assessing the application.
But she added that the regulator recognised this was not an exact science. It was not possible to predict what a borrower would do tomorrow. A proportionate and common sense approach was all it expected. Beyond that, said Woodall, it was for the lender to set its own criteria.
The latest IMLA survey showed that brokers were experiencing some difficulties in this area. Lenders have a variety of policies regarding the maximum age for a borrower and brokers should shop around. There is a clear market opportunity here for innovative products that adjust post retirement and IMLA would hope the current FCA review will help settle some outstanding concerns for lenders giving greater confidence in this market. In the meantime probably the best solution for a client who meets this problem is to ask the lender for a review of their case.
Andrew Montlake is director of Coreco
The whole question of age is something that has started to become more of an issue for borrowers and therefore mortgage brokers. One of the main thrusts of the Mortgage Market Review is that of assessing affordability, so for me, if a mortgage is deemed affordable whilst the borrower is employed or in retirement then surely the age of the borrower is irrelevant.
Given the changes in working habits, the fact that many more people are going to be working at least to the age of 70 if not beyond, there is no reason to impose an age limit, especially one governed by an anachronistic state retirement age of 65 found specifically where interest-only policies are concerned.
There is no other way to term many lenders’ policies other than ageist, because the only thing stopping a lender from lending to an applicant who can clearly afford the loan is age. I understand there are fears lenders have that people are more likely to be ill, be forced to stop work or die, but this can happen at any time in a borrower’s life.
It was refreshing to see the proposed appointment of Ros Altmann as an older workers’ champion should the present government find themselves in power again after the next election and this is a step in the right direction. What lenders need is firm guidance from the FCA to ensure that older borrowers are treated as fairly as everyone else and that age is never a deciding factor when determining whether to lend or not.
