Lifetime mortgages are secured against the value of a property and repaid when the borrower’s property is sold after they die or enter long-term care.
While interest rates tend to be higher than on regular mortgages, increased competition in the sector has recently narrowed the gap between the product types.
Mortgage brokers have said larger lenders in particular could be doing more to cater for the needs of older borrowers, pointing out that smaller firms are currently driving innovation in later-life lending.
Mike Richards, director at London-based Mortgage Concepts Associates, said 50 per cent of his clients are older people looking to borrow money.
“I would say there needs to be some involvement in that area from the larger lenders, who do not seem very keen to do something.
“If [older clients] want a normal mortgage, then I think there are some lenders coming into that field, but it needs a lot more competition from major lenders. Larger lenders do look outside the box, but not often.
“If you are still working at the age of 75, why should you not use the income to justify a mortgage? You don’t stop at 65 – you could go on another 10, 15 years.”
Mr Richards pointed out that lenders often use the same affordability criteria for older people as they do for younger borrowers.
While younger borrowers can repay the loan over a longer term, the shorter terms available for older borrowers means they do not meet the criteria.
Michelle Lawson, director at Hampshire-based Lawson Financial, said she agreed with the FCA’s findings, pointing out that pension income is a reliable source of income to use for repayments.
“If you assess on pension income, I really can’t see why a lender can’t go past 65 or 75,” she explained.
“I think there is a gap, and it is about time we came back to a case-by-case basis rather than computer-based assessment. If that comes back round, then hopefully they will change the underwriting.”
Ms Lawson pointed out that lenders will offer loans to the self-employed and people on probation periods even though their income is not necessarily guaranteed.
simon.allin@ft.com
