Are you too old to get a mortgage?

First-time buyers struggling

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First-time buyers above the age of 40 are struggling to get a mortgage because of out-dated lending rules

First-time buyers above the age of 40 are struggling to get a mortgage because of out-dated lending rules.

Better healthcare, medicine and food options mean that we're living longer than we used to. This has slowed life down, taking the pressure off people to get married, have children and buy a house when they're in their twenties. Unfortunately, mortgage lenders haven't kept up with these developments.

It's becoming clear that more needs to change in the way that lenders lend to help 'older' people in the property market.

From here to retirement

Your age at the start of the mortgage isn't such a big deal; it's how old you are when you pay it off which has more bearing on your eligibility to borrow.

Many lenders say that your mortgage should be paid off by the age of 75, though in practice a number of them require it to be paid off by the time you reach State Pension age. We have had a look at the upper age of limits of some of the UK's biggest banks and building societies, and detailed them in the table below.

Lender

Upper age limit

Royal Bank of Scotland

65 (70 by exception if you can prove retirement income)

NatWest

65 (70 by exception if you can prove retirement income)

Aldermore

85

Principality BS

70

West Brom BS

70

Nationwide

75

Halifax

65 (75 by exception if you can prove retirement income)

Bank of Scotland

75 (longer if you can prove retirement income)

BM Solutions

75

HSBC

75

Accord

75

Cheltenham & Gloucester

75

Coventry BS

65 (75 if you can prove retirement income)

Lloyds TSB

75

Yorkshire Bank

75

Clydesdale Bank

75

Yorkshire BS

Dependent on personal circumstances

Chelsea BS

Dependent on personal circumstances

Norwich & Peterborough BS

75

Metro Bank

No limit



Thanks to Government rulings made earlier this year, it is now a requirement to prove your retirement income from State Pension age onwards. A homeowner's point of retirement is determined by either the anticipated retirement age or the State Pension age, whichever is the lowest.

Nationwide has said that customers can't get their mortgage extended into their retirement unless they can prove that they have a private pension. It doesn't matter how much is in the pot or if they even pay in to it, nor does it matter about other savings or assets.

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2025: the rise of the 40-year-old first-time buyer

As the average age of first-time buyers is expected to increase over the next decade, complaints from them have increased too.

Buyers as young as 40 are having great difficulty securing mortgages because their term will end after that all-important State Pension age, meaning they're unable to prove they will be able to pay it off in time.

Removing another rung from the property ladder

Since the Mortgage Market Review came in to effect in April, regulations have been even tougher on potential borrowers. Lenders won't just consider your salary when deciding how much to lend you; they'll also want to look at your money position after your regular expenditure is taken into account.

That means outgoings such as bank statements, pension contributions and childcare will be made known to lenders. Types of expenditure like alcohol, cigarettes, eating out and haircuts will also be taken in to account to judge if you have the right personality to be a homeowner.

On top of expenditure they'll assess whether you'll be able to keep up with your payments if interest rates rises. They usually base it on a 7% interest rate.

So if you're over 40, have young children, had some late bill payments in the past and enjoy regular takeaways, you might be in trouble.

What can I do?

Your best option is to get a mortgage over a shorter period. It's a good idea to go for a shorter mortgage term where possible anyway as you'll clear your balance earlier, and pay less overall. For example, paying off a £150,000 mortgage on a 5% interest rate over 25 years will cost you more than £263,000 thanks to the interest charges. However, clear it in 20 years and you'll pay just £237,000, saving you the best part of £26,000.

You may also want to speak to a mortgage broker who will be better informed on which lenders are likely to want to deal with you and which ones to avoid.

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Have you had difficulty securing a mortgage because of your age? Tell us about it in the comments below.

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