SPECIAL FEATURE: Why we scrapped upper age limit
Dudley Building Society’s head of credit Jonathan Moore explains why Dudley Building Society scrapped upper age limits across its entire product range.
Over the last decade there has been an increasing shift towards a flexible approach to retirement ages (especially following the removal of the statutory retirement age), and it is believed that this shift will continue to gather pace.
Many now work beyond 65 (either through necessity or through choice), and are therefore as capable of servicing a mortgage beyond that age as they were before. A large proportion of these individuals will also see the benefits of paying in to their investments and pensions for a longer period of time.
Perhaps more significantly, there are also a number of demographic and societal changes taking place which increasingly mean that people need mortgages into later life. First-time buyers are buying at a later age for a variety of reasons (e.g. the reduction in availability of higher LTV mortgages following the credit crunch resulting in a need to save much larger deposits than was previously the case; the impact of tuition fees; the effect on affordability arising from the Mortgage Market Review changes of 2014; ‘generation rent’ having to deal with juggling finances to pay rent as well as save a deposit). At the same time, mortgage terms are also increasing due to the difficulties for many to deal with increased affordability requirements coupled with house price growth which has outstripped wage inflation. If mortgages start later and then run for longer, it is clear that more people will need mortgages which extend into later life.
There are a wide range of other reasons for the need for later life mortgages. For some, divorce will result in a need to ‘start again’ and mortgage finance will be required. For interest only borrowers, there may be a shortfall to accommodate from their repayment strategy, and mortgage finance is needed to allow this shortfall to be overcome.
For others, lifestyle factors may come into play, and they may simply not wish to repay debt earlier in life as this allows them to do other things with the money (such as say having a holiday home).
A recent report by the BSA (Lending into Retirement: Interim Report November 2015) provided a breakdown of the maximum age provisions for the building society sector; it found that the majority of the sector would only lend up to the age of 75 irrelevant of circumstance or ability to pay.
Whilst borrowing into later life will be a necessity for some, the extensive experience of the Black Country lender demonstrates that for many, borrowing into later life is an active choice as this allows them to run their lives in a way which most suits their needs and circumstances. Borrowing in later life does not have to be seen as something which only happens as a result of something having gone wrong – it can be a positive choice.
For too long, older borrowers have struggled with mortgage accessibility, and those options which did exist generally treated these borrowers as second class citizens by forcing them to borrow from a limited range. Dudley Building Society promotes all borrowers to be equally worthy of consideration, and by making their entire range available; boldly demonstrates they do not discriminate by age.
Cases from older borrowers although occasionally offering additional complexity, offer no more risk than younger ones, providing that underwriting is carried out by professional human underwriters. However sophisticated credit scoring becomes, when dealing with more complex cases, there really is no substitute for human consideration. The society has started 2016 with enthusiasm along with a strong proposition for those wishing to have a mortgage in to later life.