You are here

Lenders fail to serve aging population

'Regulators have quite rightly focused on the need to stop irresponsible lending, but that is having a chilling effect on lending to responsible borrowers'

8 December 2015

Add comment

More than 45 per cent of older borrowers believe lenders should place a greater emphasis on a borrower's ability to repay their loan, rather than concentrating on their age.

Thirty-seven per cent of borrowers aged 45 and over want to see age limits on borrowing scrapped, a study conducted by More 2 Life has revealed.

Many lenders (in particular mortgage lenders) have very firm age restrictions in place, stopping older people from borrowing. For example, it is practically impossible to get a mortgage from a banking society which runs beyond the borrowers retirement age.

Dave Harris, managing director of More 2 Life, believes that older borrows are being squeezed out because of increased pressure from regulators, who have been advocating responsible lending since the financial turmoil which started in 2008.

'Regulators have quite rightly focused on the need to stop irresponsible lending, but that is having a chilling effect on lending to responsible borrowers, and even those in their 40s as recent FOS [financial ombudsman] rulings have shown.'

The pension freedoms that came into effect earlier this year have liberated savers and given them the opportunity to invest in a wide range of areas. In light of increasing life expectancies, these new freedoms have dovetailed very well with the needs of an aging population.

Lenders however are yet to respond to this demographic change in society. Harris believes this area has potential for huge growth, and older borrowers are being punished by a lack of inertia.

'Pensioners and those in the run-up to retirement need flexibility and are entirely capable of making informed and sensible decisions as long as there are lenders willing to lend.

'Retirement lending will be a growth area in the future as innovation in retirement income planning develops and it is one that the industry as a whole should be looking at now - one of the drivers for that growth will be the huge number of Interest Only Mortgages due to mature over the next 15 years or so where the borrower has no means of fully repaying their debt.'

The study also reveals that 63 per cent of respondents (all aged 45 and over) would welcome more options to borrow in retirement, as 17 per cent confirmed that they have already borrowed in retirement.

 

Categorised in:

Tax & Wealth structuring Pensions