A new survey has found that around half of 25 to 34 year olds in the UK believe they may need a mortgage that lasts into retirement and are concerned they won’t be able to get one.
Some 27% of people in this age group also think they may struggle getting a mortgage into retirement because their credit history, income level or age will count against them, the poll from the Building Societies Association says.
‘We are all now living much longer and getting on to the listing ladder later in life. Many younger buyers are realising that they may not be able to pay off 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,’ said Paul Broadhead, head of mortgage policy at the BSA.
He also pointed out 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,’ he explained.
‘This means they may have to borrow over a longer term to secure a mortgage. 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,’ he added.
However, he also pointed out that despite the concern shown by younger home buyers, it isn’t all doom and gloom. ‘The building society sector tends to be more flexible and willing to offer mortgages that extend into retirement,’ said Broadhead.
‘ Some societies do not have upper age limits, tend to take the 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. The sector is also keen to debunk the myth that once you are over 40 you are too old to get a mortgage,’ he added.
‘Given that the population is aging and house purchase later in life is more common, the Government, regulators and the financial services sector needs to cater for this change. Paying off a mortgage by the age of 65 is no longer a reality for many,’ he concluded.
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Source: Property News Spain