Member Article

Affordability, not age should be key

Mortgage lenders need to give more focus to the ageing population and the fact that more people want to, by or necessity will, work beyond State retirement age. Yet according to The Mortgage Adviser, LEBC Group’s independent mortgage service, the one area in which a proper affordability assessment is ignored is lending to older borrowers

Instead there is an arbitrary age barrier erected by most lenders against older would be borrowers which takes no account of other personal circumstances, credit worthiness or reasons for the loan.

Kay Ingram, director at LEBC Group says, “Advancing age is not inextricably linked to a poor credit risk, in many cases the reverse may be true. A younger borrower can be dismissed from their job, or suffer ill health. Skills may become outdated and earning potential may fall as well as rise.

“Conversely an older borrower cannot be sacked from their pension scheme. Even if the scheme were to fail, existing pensioners are guaranteed to receive their pension from the Pension Protection Fund. A younger member of that same scheme has less protection and can lose 10% or more of their potential pension thus straining their affordability criteria. Borrowers over State pension age have a guaranteed income which is guaranteed to increase every year by inflation or at least 2.5%. No one of working age has that guarantee.”

Refusing to lend after someone ceases working and starts drawing a pension, will leave this growing older population seeking finance from a smaller number of equity release lenders or borrowing at excessively high rates from finance houses.

Ingram concluded, “Mainstream lenders risk losing a share of a substantial and growing segment of the market if they persist in looking no further down the application form than the applicant’s date of birth.”

This was posted in Bdaily's Members' News section by LEBC Group Ltd .