Lending to homeowners approaching or in retirement has been heavily restricted since the Mortgage Market Review, launched in April last year, placed more emphasis on assessing how borrowers would repay their mortgage in the future. Many lenders lowered their maximum age restrictions as a result.
After concerted industry and consumer calls for lenders to loosen age restrictions, Marsden Building Society, the largest building society in Lancashire, has launched two discounted mortgage rates aimed exclusively at homeowners with a pension income.
Heather Crinion, general manager, operations, said there was a generation of borrowers out there who needed help.
“These borrowers have paid their mortgages all their lives and have a proven track record of affordability.”
A two-year discount rate at 2.99% is available up to 40% loan-to-value (LTV) for borrowers taking a mortgage out on interest only. For repayment customers a rate of 2.79% is available up to 60% LTV. Both products come with a £299 booking fee and £299 arrangement fee. They have a free standard valuation and fee-assistance for the legal costs associated with a remortgage. The products are portable and have a 5% annual overpayment facility.
Distribution of the mortgages is restricted to selected mortgage networks until the Marsden has tested how popular the products are.
A minimum age restriction of 55 applies to the products while the maximum age at the end of the term is 85.
Retirees applying for one of the products will have their mortgage payment stressed at a higher rate of interest than borrowers who are employed. Crinion said the Marsden was using a rate of 8.5% for retirees because they have less opportunity to earn more money should interest rates rise and find themselves in a position where they are struggling to make their payment.
“Employed borrowers can take a second job or work longer hours if they find themselves in financial difficulty but these options are less available to retirees which is why we’ve taken a stricter approach to assessing their affordability.”
Crinion said she does not expect it to be long before other lenders make similar advances into the retiree market.
Leeds Building Society announced this week that it was weighing up the viability of developing a range of mortgage products for older borrowers and was working with the Council of Mortgage Lenders to research this market.
A spokeswoman for the CML said: “Among other issues we are considering how the mainstream mortgage market and the equity release markets interact and whether there is room for improvement here to help ensure a more seamless experience for older borrowers.”