Consumers looking for a mortgage term which stretches beyond their stated retirement age will be offered the option to repay their home loan over 40 years rather than the typical 25-year period.
A rise in demand from borrowers for greater flexibility around post-retirement lending rules after the pension freedom changes were in announced in the 2014 Budget, has led the society to revisit its older borrower policies.
Research published by the Council of Mortgage Lenders found that 35% of all new residential lending last year was offered to borrowers whose mortgage extended beyond their 65th birthday.
Richard Fearon, Leeds Building Society’s chief commercial officer, said: “The age at which people now step onto the property ladder is increasing so logically their age at the end of their mortgage may also be higher.
“There’s also greater flexibility over when people choose to retire, which can affect their ability to pay for a mortgage,” he added.
“The new pension freedoms mean more choice about when to access a savings pot but most people don’t decide how to use their retirement fund until close to the time they stop work.”
Under Leeds’ new rules, borrowers who are within 10 years of their stated retirement age, or whose loan extends more than five years into their retirement, will continue to be underwritten on the lower of current earned or future pension income.
Affordability for those borrowers with more than 10 years to their stated retirement age will be assessed on their current income.