Some see their seventies as a time to sail the world, write a book or simply sit back. Others will still be paying off their mortgages. UK bank NatWest last month joined the pack hoping to serve the latter camp, launching home loans that can be repaid up to age 75. Some lenders go still further. Family Building Society stretches to 95, although nonagenarians will only get a five-year loan.
Extending loan terms for the elderly reflects, perhaps belatedly, changed society. People work for longer. In the UK, the average retirement age has been gradually creeping up this century, to 65.1 years for men and 64 for women; although men have yet to revert to the 67.2 years of their forefathers in 1950.
Chances are, however, that working for longer will continue to tick up. Demographics, improved health and financial necessity all speak to spending longer behind desks, machines and steering wheels. Britain falls well behind peers in terms of the proportion of those aged 65-plus in the workforce. The UK’s one in 10 is up on the decade but well behind the 14.7 per cent OECD average. Given today’s high house prices, says one mortgage broker, the standard 25-year repayment loan term assuming retirement at 67 “has all but disappeared”.
Age is just one of the societal trends driving demand for extended mortgages. Divorce is another. Taking out a fresh home loan in your forties or fifties can be tough enough without compressing repayment into 10 or 20 years. Pushing out the maximum age allows payments to be spread over a longer term, making them more affordable. Likewise the case for parents helping children on to the housing ladder or seeking their own buy-to-let nest eggs.
Risks to lenders are mitigated by robust affordability checks, beefed up by the regulators’ Mortgage Market Review after the financial crisis. Borrowers need to work past a typical retirement age or demonstrate sufficient pensions or other means of covering payments. Not perhaps the most carefree way to spend the twilight years, but one likely to become increasingly common.
Do you expect the market for extended mortgages to grow? The Lex team is interested in hearing more from readers. Please tell us what you think in the comments section below