Mortgage lenders woo older borrowers

High Street banks are still wary, but there are lesser-known options

Updated: 
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Following calls for mortgage providers to cater better for older borrowers, some smaller lenders are offering deals to people in their 90s.

National Counties Building Society, for example, has no upper age limit, and nor does the Harpenden Building Society. The Buckinghamshire Building Society has a product targeted specially at the over-65s.

The Market Harborough Building Society will lend to the over-65s where there's proof of sufficient income, and the Stafford Railway Building Society will lend up to the age of 85.

In recent months, would-be home owners, including older borrowers, have found it far harder to get a mortgage than before. The reason is new rules introduced in the wake of the financial crisis as part of the Mortgage Market Review.

While the rules were designed to make sure that people aren't offered a mortgage they can't afford, there have been complaints that lenders are interpreting them far too harshly.

Many lenders will say that they offer mortgages that can be paid off up to the age of 70 or 75 - but in practice will turn people down because they can't prove they'll have enough income in retirement. Others will offer mortgages with such short terms that the increased monthly payments are unaffordable.

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As a result, many older people are forced to turn to equity release schemes, or lifetime mortgages, handing equity in their property over to the lender in order to repay the original interest-only loan.

And these deals are expensive, with figures from the Equity Release Council (ERC) showing that the average lifetime mortgage rate is 6.49% compared to a 3.09% average for a standard five-year fixed mortgage and 3.93% for a standard 10-year fixed mortgage.

Earlier this month, David Sinclair, director of think-tank International Longevity Centre-UK, urged mortgage lenders to re-think their policies on age, which he said could be seen as discriminatory.

"The industry and the regulatory environment have been seemingly struggling to respond to ageing and demographic change," he said.

"We are living longer, our family structures are changing, we are marrying later and we are working longer. At the same time, financial insecurity will result in more people needing to borrow more and later in life."

The best solution is for would-be borrowers to shop around; using the services of a mortgage broker can help. And it's worth making sure you don't have any other black marks on your application, such as payday loans or credit card debt.
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