FSA views vary over lending to Over 50s

The Financial Conduct Authority (FCA) warns over lending to over 50’s and plans to implement new plans to stop irresponsible lending.

The regulators Mortgage Market Review which was published today illustrated that more than half (53 per cent) of borrowers aged over 50 have current mortgages stretching past the age of 65. The MMR also revealed, an even larger proportion (65 per cent) of those over 50 hoped to borrow into their retirement.

Many of those over 50 planned to downsize to smaller properties however rather than repaying their mortgages, many planned to increase their borrowing to sustain their quality of life in retirement and help the struggling younger generation get on the property ladder.

According to the report, the Citizens Advice Bureau had reported seeing mortgage lenders carrying out poor lending decisions to older proportion of the population, including a recently retired man who had fallen into arrears and therefore led to the lender applying for passion in the courts despite been granted a £135,000 mortgage 18 months earlier with the lender being fully aware of his age and approaching retirement.

The Financial Conduct Authority said “We recognise that retirement age is becoming increasingly fluid, as state pension ages are put back. We also recognise that it is not possible to accurately predict retirement income, particularly where consumers are many years away from retirement.”

“However the proportion of consumer who work beyond state pension age is not high, with, for example, 11% of men aged 65-69 working full time, falling to 1.4 per cent aged 70 or over.”

Following analysis of the whole sector, the FCA plans to introduce new proposals, which are intended to block any return to the risky mortgage lending seen at the height of the last boom, prior to the financial crises. Today’s news shows the growing difficulty which individuals seeking mortgages for pensioners face in the current climate.

The report added “The degree of scrutiny that the lender applies may vary according to the period of time remaining to state pension age. The closer it is, more robust the evidence of the level of income in retirement should be.”