Mortgages.scot

Age is a factor in many aspects of life. When it comes to mortgages, lenders often have criterial that places a cap on age. For many that cap is 75. That cap is not the maximum age you can apply for a mortgage, no. It's the maximum age at the point the mortgage can expire. So if you want a mortgage term of 25 years, you must apply for it at or before the age of 50.

More and more the regulator and the Financial Ombudsman Service (FOS) is taking a less supportive view of this approach to lending. FOS has detailed a case study on their website which highlights their position.

The Case Study

Below is the case study they highlighted demonstrating the position the client was in. Quite a typical one that many lenders take at the moment.

Sally felt discriminated against on the grounds of age when a bank wouldn’t allow her to apply for a loan. This was because she’d be 75 before the end of loan term. The bank told her that because of typical life expectancy, there was a risk she wouldn’t be able to repay the loan.

The lender makes it clear the reason they cannot offer a loan is because Sally would be over 75 by the time the loan ended. They suggest life expectancy as the reason she many not be able to repay the loan.

The FOS view

Interestingly and quite appropriately the first question the FOS asked the lender was that they provide a risk assessment showing that people over 74 are less likely to meet their loan obligations. The bank was unable to provide this.

Whilst the FOS accepted the bank can set their own lending criteria, it wasn't fair to use a broad brush approach of using age alone to refuse an application for Sally. Especially when the bank could not provide any risk assessment that supports their position.

The view the FOS had was that the lender didn't consider Sally's individual circumstances so could not reasonably support the bank's position that she would not be able to meet her loan obligations.

Sally had ultimately secured a loan elsewhere so the FOS did not ask the bank to consider a loan application for Sally, but that would have been their recommendation. They did award Sally compensation though which further supports the position that the FOS do not consider age alone to be a reasons for refusing to at least assess individual circumstances.

Summary

Lenders need to remove this restriction and follow the FOS approach. There are many clients out there who have more regular and guaranteed income than younger applicants. Pension, Savings and other assets can provide strong support to proving those over 75 can hold their own!

We will all die at some point and lenders are placing more emphasis on this happening beyond 75 so don't want to be caught up in estate delays after death to get their money back. I can understand that. But we are living longer and lenders are not at risk of loosing providing they assess applicants both correctly and individually to ensure their position is protected in the event of death. But then, they should do that anyway, we don't always die in old age!