It has been a rather tumultuous period for those borrowers who a) may not even deem themselves to be in the ‘older borrower’ category – does 40 count as old?; and b) those who are perhaps closer to retirement but are seeking finance over a term that will take them into, what we might call, the traditional state retirement age. Although as we all know, these particular goalposts are being moved by the government all the time.
I would hope that the ‘older borrower’ issue for those who are 20-25 years away from retirement has now been resolved. It is frankly ludicrous that those in their 40s were being turned down for loans on the basis that their retirement income is unknown at that point. Of course, it is going to be unknown because quite frankly when you are 25 years away from retirement who can give a firm answer to such a question?
The perhaps more pressing issue is for those who may have many more grey hairs and actually be in the region of five or so years from retirement. These potential borrowing problems are undoubtedly exacerbated by the proliferation of interest-only mortgages and the average pension pot being a lot smaller than the needs of many individuals. In those circumstances, I can fully understand why a lender – especially post-MMR – will want to avail themselves of more information and a complete picture on how the mortgage might be paid into retirement.
That said, these are ‘problems’ which can, and should, be resolved and therefore it’s positive to see lenders such as the Marsden Building Society explicitly launching products which are aimed at the 55 and over age group. These, rather interestingly, come in both interest-only and repayment flavours and, perhaps unsurprisingly, the former is only available up to a maximum of 40% loan-to-value (LTV).
However, this is surely the type of market response and recognition older borrowers – and their advisers – were looking for and I suspect this product area will soon be bolstered by offerings from many more lenders. It hasn’t happened overnight, and it has taken a building society to go there, but it’s undoubtedly a positive step forward for a part of the marketplace which is unquestionably going to see the number of potential borrower customers increase in the months and years ahead.
Add to this the potential for an equity release option and one would hope we are on the first steps of a more concerted and balanced approach to the needs of those borrowers who many no longer be south of 40 anymore, but are still credible and responsible enough to pay their mortgage.