Chief executive discusses the challenges faced by senior homeowners
Current market conditions are testing many borrowers, yet it is often wrongly perceived that older homeowners are somehow immune to the cost-of-living crisis, at an age where many of them may have paid off their mortgages.
All too often, though, senior borrowers find themselves equally hit by rising inflation, unable to change their fixed incomes and often struggling to release the equity in their homes.
Leon Diamond (pictured), chief executive and founder of LiveMore, believes that the mortgage industry is guilty of age discrimination.
“At LiveMore we see examples of this every day when customers come to us having been rejected by banks and other lenders, as well as brokers, and the main reason is their age,” he said.
For example, Diamond pointed to interest-only borrowers coming to the end of mortgages, who have no means to repay the capital, and have asked their lender if they can extend them. The answer, he suggested, is often ‘no’ despite having made payments every single month with no history of arrears for 20 to 30 years.
“They should have had an exit strategy, you might say, but pre global financial crisis 2008, most borrowers were not advised to do this,” he added.
Diamond believes the mortgage industry has a duty to find solutions for borrowers like this, and not reject them or tell them their only option is to downsize, or worse still, repossess their properties.
Most people in this situation are likely to be over 50, perhaps approaching or even in retirement, Diamond said, and the problem is that many lenders only accept salary as income, which he believes is a very outdated way of working.
“It is quite acceptable for lenders to use pensions, investments, trusts, rental income from letting property and even foreign income as part of an affordability assessment,” he added.
From research commissioned by LiveMore last year, Diamond stated, the older generation perceives they are discriminated against.
“Only 4% of 2,000 people we surveyed between the ages of 50 and 90 thought they would be eligible for a mortgage; that went down to 2% for those over 80,” he said.
Older people are widely demonised in the UK and are mostly seen as incompetent, hostile, or a burden on others, according to a report by the Centre for Ageing Better.
This negative attitude, the report showed, is prevalent in the workplace, health and social care, and the media, it is suggested. Women and people from black and minority ethnic groups face a “double jeopardy” of discrimination.
LiveMore, Diamond commented, has plenty of case studies on its website of people who despaired at ever getting any finance in their twilight years, even though solutions were available.
Diamond believes more lenders need to start offering mortgages to people who can afford to make monthly payments, regardless of salary.
People aged 50-90+ deserve to be heard, Diamond stated, and they have the right to be offered good mortgage advice, which the mortgage industry is capable of providing. Indeed the entire market should be doing this anyway as part of Consumer Duty.
“Under the new rules established by the Financial Conduct Authority (FCA), we must deliver good outcomes for everyone, no matter what their age,” he said.
Older borrowers, Diamond considered, do have a range of mortgage options designed specifically for them, the latest product being RIO introduced in 2018 as an alternative to a lifetime mortgage.
The Financial Conduct Authority, he added, had to authorise RIOs and introduce specific regulations before these products could be launched.
“Borrowers over 50 are also eligible for many standard mortgages, like every other age group; it is not the choice of mortgages that is the issue, it is access to them,” Diamond said.
Raising awareness and education, Diamond believes, are the key factors for customers, brokers and the mortgage industry as a whole.
Moreover, Diamond thinks lenders should re-examine their lending criteria as, in many cases, it is too restrictive on older borrowers, which he argues is a blinkered approach.
The more lenders there are in this space, he added, the more the word would spread that it is possible to get a mortgage if you are aged 50-90+.
“An easy way for lenders to get into this market is to take a holistic approach to affordability including all assets, income, pensions, expenses and liabilities,” Diamond commented.
Lenders could also get into offering interest-only and RIOs, he said, by working around interest cover as a ratio rather than relying on income multiples.
What challenges do you believe older homeowners are facing amid the current market conditions? Let us know in the comment section below.