Mortgage affordability key for ageing workforce

John Hewitt Jones

August 16, 2016

old people OAP papers worried

Mortgage lenders must adapt to an ageing workforce and scrap age borrowing barriers according to The Mortgage Adviser.

A population that continues to age and work beyond the state retirement age is being failed by affordability assessments that fail to take account of personal circumstances and credit worthiness, say the independent mortgage service.

Kay Ingram, director at parent LEBC Group, said: “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 Skills may become outdated and earning potential may fall as well as rise.

Equity release market experiences fastest growth in a decade

“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 may encourage citizens to turn to a smaller number of equity release lenders or resort to finance houses with higher lending rates.

Ingram added: “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.”

The Mortgage Adviser is part of the LEBC group, a financial advice company established in 2000 with 14 branches across the UK.