The mortgage market has traditionally been closed to the older generation as mortgage lenders have upheld a cut off age of 70 or 75, but with social and economic factors meaning that people are buying later in life, there is an increasing need for longer mortgage terms for older borrowers.
According to Andrew Montlake at mortgage broker Coreco, the older borrower is a “massively growing market”, with older borrowers seeking to remortgage and release equity for themselves, help their families or remortgage existing debt that they cannot pay.
Dr Louise Overton, College of Social Sciences, University of Birmingham, states that: “A growing number of older people are facing important decisions about how to manage their income and assets over a longer period than previous generations, presenting both opportunity and challenge for the later life lending sector.”
A deal for retirees
Aldermore has launched the first deal allowing retired borrowers to remortgage their interest-only loan when it comes to an end – using the sale of their property as a means of repaying the debt. The deal is available to borrowers aged between 55 and 85, but the term must end by the time they are 99.
A relaxing of the regulations around retirement interest-only mortgages means that lenders can now accept borrowers that want to use their property as the means to repay it when they die or are moved into care.
Aldermore’s commercial director, Charles McDowell said: “The house buying journey has changed markedly over the years. First-time buyers are more likely to be in their 30s or 40s, second stepping is delayed and retirement is later. We believe that a change is needed in the way we consider later life lending.”
Giving older generations more choice
Whilst Aldermore is the first lender to offer this option, indications are that other providers are looking to introduce similar products too. Nationwide plans to launch a retirement interest-only mortgage to give borrowers “more choice for managing their finances as they get older”. The Post Office has already unveiled the market’s first interest-only mortgage for retired borrowers taking a new mortgage and Family Building Society has confirmed plans for an interest-only mortgage for those needing to remortgage in retirement. Loughborough Building Society has also removed the upper age limit on its mortgages, meaning borrowers can take out a loan for up to 25 years regardless of their age at application.
Retirement mortgages are certainly a step in the right direction to help the older generation clear interest-only debt, move home or pass on an early inheritance. While lending in later life can be complex, especially when dealing with issues such as ill health and income reduction if a partner dies, mortgage providers seem to be rising to the challenge to give older consumers more choice and extend a lifeline to those who need more time to repay their mortgages.
