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Rise of the 'silver borrower'

2nd March 2018

A silver-haired octogenarian roaring down the driveway of their new luxury bungalow in a Lamborghini on the way to the gym sounds an unlikely scenario…

But it’s a fanciful visual metaphor for the ways in which our society is changing – and with it the mortgage market.

An ageing population, higher property prices, a shortage of housing stock and new pension freedoms…all have played a part in irrevocably reshaping the industry.

Add in the increasing age of first-time buyers, and the fact that many people now opt for a ‘phased retirement’ rather than finishing work in their mid-60s, and the very idea of still paying a mortgage at the age of 85 – virtually inconceivable 20 years ago – begins to sound almost the norm…

Staffordshire-based Leek United Building Society are amongst the latest lenders to adapt to the borrowing needs of an ageing population.

“The industry is experiencing the beginning of a wave of ‘new’ borrowers coming through, with lenders now becoming more inclined to lend over a person’s ‘life period’,” said Mark Schofield, the Society’s Head of Credit Risk.

“Everyone’s circumstances are different. For example, we’re seeing a mix of people who’ve got interest-only mortgages elsewhere and who find that their current lender is reluctant to extend their borrowing on anything other than a short-term basis.

“Then there are those living in larger properties, looking to move or downsize and or take out a mortgage to enable them to provide the equity for their children to buy a place of their own.”

There is, of course, a distinction between lending INTO retirement and lending IN retirement, but the criteria remain broadly similar: the borrower must have an ability to repay the loan over its entire term, including any capital repayment required at the end of the term

“They may use their pension arrangements as a means of making the payments, or their property may be of a certain value and its eventual sale will cover the redemption,” continued Mark.

Leek United’s full range of mortgage products – from interest only to repayment – are available to older borrowers, and the Society readily welcomes all enquiries from customers looking to borrow into, and beyond, retirement.

Many, however – particularly those on a reduced income following retirement – prefer the relative cost-effectiveness of an ‘interest only’ option.     

“As a Society, we look at the overall ‘reasonableness’ of a person’s individual circumstances. Unlike some lenders, we don’t have an upper age limit on mortgages, but we do need to consider how repayments will be made throughout the term of the loan and how changing personal circumstances may affect income !” continued Mark.

“Irrespective of the reasons for the upward trend in lending into later life, there is – and will continue to be – a real demand for products for older borrowers. That’s something the industry has to respond to.”

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