New research from the BSA has indicated that almost half of 25-34 year olds believe that they will need a mortgage that extends into retirement, if they are to fully repay their loan.
Additionally, 27% of people in this age bracket feel that they will struggle to get a mortgage into their retirement due to their credit history, income level or age.
Living longer
Paul Broadhead, Head of Mortgage Policy at the BSA noted, ‘we are all now living much longer and getting onto the property ladder later in life. Many younger buyers are realising that they may not be able to pay of their mortgage until after they retire. As the average age of a first-time buyer increases, borrowing into retirement is becoming the new normal, rather than a niche form of lending.’[1]
He continued by saying that, ‘the Mortgage Market Review, introduced just over a year ago, has had an impact on borrowing. The application process is much more rigorous and borrowers now have to contend with strict affordability assessments that factor in other commitments. This means they may have to borrow over a longer term to secure a mortgage.’[2]
‘These demographic and regulatory changes mean some borrowers may find their mortgage application is rejected if they need to borrow into their anticipated retirement. The mortgage market needs to change to cater for this shift in borrowing,’ Broadhead added.[3]
Positivity
Mr Broadhead went on to say that it is not all, ‘doom and gloom,’ for would-be homeowners. He suggests that, ‘the building society sector tends to be more flexible and willing to offer mortgages that extend into retirement. Some societies do not have upper age limits, tend to take case-by-case approach to applications and are keen on developing long-term products that cater to first-time buyers who may want or need to borrow into older age.’[4]
Concluding, Broadhead said that, ‘the sector is also keen to debunk the myth that once you are over 40 you are too old to get a mortgage.’[5]
[1] http://www.propertyreporter.co.uk/finance/paying-off-a-mortgage-by-65-is-no-longer-a-reality-for-many.html