People over the age of 55 are being frozen out of new mortgages, according to a new study. Harsher lending criteria means mortgage companies are reluctant to lend to people over the age of 55 - leaving them in inappropriate homes or paying through the nose for expensive deals.
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The study, by Key Partnerships, asked estate agents about the mortgage market for people over the age of 55. Most reported that harsher lending criteria meant that many over the age of 55 were struggling to get a mortgage at all, and 58% said the mortgage market didn't meet the needs of people over the age of 55.
Given the fact that 40% of over-55s still have a mortgage or overdraft, that's a significant number of older people facing a major mortgage headache.
High street banks have been turning borrowers away on the basis of their age for some time. There is plenty of anecdotal evidence of people in their 40s who are looking for a 25 year loan, who have been rejected because the loan takes them beyond their retirement age.
The fact that so many are struggling to remortgage means that while the mortgage market has been incredibly competitive recently, many older people have been stranded on higher SVRS, and unable to take advantage of newer, cheaper deals. To add insult to injury, banks have not been keen to pass on rate cuts to customers on the SVR - in a bid to protect their profits.
The dearth of mortgages has also made it difficult for many over 55s to move. In many cases older people are keen to move into retirement properties, such as bungalows, in attractive parts of the country. Both the property type and the area command such a premium, that the proceeds of selling the family house has not freed up enough cash to enable them to buy.
As a result, two in five estate agents said the whole housing market was being damaged, as older people were unable to move from the family home, leaving a shortage of these properties for growing families.
What can you do?
If you need to remortgage as you approach retirement, there are a few options. Each bank has a slightly different policy, but as a general rule of thumb they will lend to the age of 70, 75, or 80 on one of two conditions. Some will lend later in life but the deal will expire on the day you retire. Others require proof that you will have adequate income in retirement to pay the mortgage.
If you plan to work beyond retirement, or have a robust final salary pension, therefore, you may still be able to remortgage.
If no bank will take you on, it's worth trying building societies, which tend to be more flexible than banks with their lending criteria. There are also a number of specialist mortgages on the market for older borrowers, but as a general rule, this comes with the trade-off of higher interest rates.
If all else fails, Key Partnerships highlights that people can use equity release to buy a home. However, it's important to understand all the implications if you choose this route, and how the interest will roll up while you have the loan.