Building societies support older borrowers
Seven months after the BSA published its first interim report on the issues being faced by borrowers in their forties and fifties onwards, well over half of the UK’s building societies will now lend to borrowers up to or over the age of 80.
These changes are also starting to help parents and grandparents who want to act as a guarantor for their children or grandchildren if they struggle to get onto the housing ladder alone.
The need for clear information to empower consumers was a key recommendation in the interim report. Today, at its annual conference in Gateshead, the BSA launches a free consumer guide entitled Can I get a mortgage at my age? The guide covers key topics, like the link between pension freedoms and borrowing into retirement; affordability; equity release options and Lifetime mortgages, the aim is to bust myths and provide consumers with clear information as well as sources for further guidance.
Facts & figures
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Building societies committed to complete the review within 12 months.
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27 building societies, which hold £200bn of mortgage assets between them, will now lend up to 80, 85 or have no maximum age limit.
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6 societies will now lend up to age 80; 10 societies will lend up to 85 and a further 11 have no maximum age limit and manually underwrite each case.
Examples
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Since removing their maximum age limit in January the Cambridge Building Society has already agreed over 30 mortgages, totalling £4.5 million, where the borrower will be over 75 at the end of the mortgage term.
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The Vernon Building Society offers a discounted rate on its Retirement Mortgage as an incentive for borrowers to register a Lasting Power of Attorney. The society’s mortgage advisors are also required to hold the equity release advice qualification.
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The Dudley Building Society has up-skilled its mortgage underwriters to better understand a borrower’s pension income and agreements they have in place, such as any agreement for income to transfer to their spouse.
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The Marsden Building Society accepts Pension income, private and state along with income from property and investments to support affordability for older borrowers.
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The Leek United Building Society removed its maximum age limit, but has chosen to control risk by introducing loan-to-value (LTV) limits for different age groups.
Comments
Paul Broadhead, Head of Mortgage Policy at the BSA said: “Since November there has been a marked shift towards increased flexibility for older borrowers. This is coupled with a better understanding and careful management of the different risks that apply to this type of lending. I am pleased to see building societies leading the charge. We are seeing innovation in the approach to underwriting and the development of processes better tailored to the specific circumstances of older borrowers.
“With the proportion of older borrowers only set to rise, this challenge must be faced by all lenders. Constructive work is underway across the market and I have high hopes for the current FCA project on the Ageing Population.”
Speaking at the BSA Conference, Jeremy Wood, Chief Executive of the Dudley Building Society, one of the first to remove its age limits said: “We took an early decision to remove upper age limits across our whole product range and train our mortgage underwriters to better understand the needs of older borrowers. The demand for what we offer is significant and so far we have seen no increase in credit risk. In fact, many cases have been markedly better. Our sector has a fantastic track record for innovation and for not closing the doors in difficult times. I passionately believe that we ought to be shouting louder about our successes in meeting the needs of 21st Century borrowers.”
