Some see their 70s as a time to sail the world, write a book, or just kick back. Others will still pay off their mortgages. British bank NatWest joined the pack last month in hopes of catering to the latter camp by issuing home loans that can be repaid by the age of 75. Some lenders go even further. Family Building Society extends to 95, although 90-year-olds only get a five-year loan.
The extension of credit periods for older people reflects, perhaps belatedly, a changing society. people work longer. In the UK, the average retirement age has gradually increased this century to 65.1 for men and 64 for women; although males have yet to return to the 67.2 years of their 1950 ancestors.
However, there is a possibility that working longer hours will continue to increase. Demographics, improved health, and financial imperatives all speak in favor of spending longer behind desks, machines, and steering wheels. The UK lags far behind its peers in the share of the over-65s in the labor force. One in ten in the UK is above the decade but well below the OECD average of 14.7 per cent. With today’s high home prices, a mortgage broker says, the standard 25-year loan repayment period for retirement at 67 has “all but disappeared.”
Aging is just one of the societal trends driving demand for extended mortgages. Divorce is another. Taking out a new home loan in your 40s or 50s can be difficult enough without compressing the repayment down to 10 or 20 years. Postponing the maximum age allows payments to be spread over a longer period of time, making them more affordable. The same applies to parents who help children up the apartment ladder or who are looking for their own nest egg.
Risks for lenders are mitigated by robust affordability reviews, reinforced by the post-financial crisis regulators’ Mortgage Market Review. Borrowers must work past a typical retirement age or have adequate pensions or other means of payment. Perhaps not the most carefree way to spend the old age, but one that is probably becoming more common.
Do you expect the extended mortgage market to grow? The Lex team is interested in hearing more from readers. Please let us know what you think in the comments below
–
