Older borrowers struggle to get mortgages

FCA tells lenders to ease off on affordability tests

Updated: 
Rejected stamp imprint on a denied real estate lender home mortgage loan document (fictitious document with authentic legal lang

As AOL Money warned this summer, many banks are now refusing to offer their best mortgage deals to borrowers in their 50s or older.

Following the introduction of new lending rules in April under the Mortgage Market Review (MMR), banks and building societies have drastically tightened their lending criteria, leaving many stuck on their lender's default interest rate.

Many are now setting a maximum age beyond which they won't allow a mortgage to run - despite clear evidence from applicants that they can afford their repayments, even after they retire.

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And as Ray Boulger of broker John Charcol told us at the time, "In theory, most of them say 70 to 75, but in practice some will apply an even earlier age unless people can demonstrate that they've got a good pension income - which, of course, most people in their 40s can't."

But help may be at hand. This week, Linda Woodall of the Financial Conduct Authority (FCA) told a Council of Mortgage Lenders conference that the rules are being misapplied, and promised to examine lenders' policies more closely.

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"There have been reports that older borrowers are finding it more difficult to get a mortgage and that this is partly down to our rules," she said, in remarks reported by the Daily Mail.

"But our rules do not aim to discourage lending to older consumers. Affordability is key. In fact the income of older borrowers such as pension income can be very stable."

In some cases she said, applications have even been refused from homeowners who are trying to downsize their home or reduce their debt. They have been told that their new repayments wouldn't be affordable - even where they would be lower than before.

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In September, a survey from mortgage brokers' organisation the Intermediary Mortgage Lenders Association (IMLA) revealed that four out of five brokers are seeing lenders cut the amount they're prepared to lend.

"Lenders are keen to balance sensible checks with the desire to find an answer to borrowers' needs," says Peter Williams, executive director for IMLA. "Nonetheless, the available options have clearly diminished for some borrowers more than others."

The main mortgage providers stick by their claim that they are simply abiding by the MMR rules. However, they do in fact have quite a degree of flexibility in terms of how financial affordability tests are applied. And some smaller lenders are perfectly happy to extend loans to older customers who can demonstrate they can afford it - so it's worth shopping around.

Read more about mortgages on AOL Money:

40-something buyers 'too old' for a mortgage

Only half know the new mortgage rules

MMR rules hit mortgage approvals