Becoming a first-time buyer later in life has its pitfalls as many young people are now realising they most probably would have to drag their mortgage debts into retirement.
New research from the Building Societies Association (BSA) has revealed that this would be the case for nearly half of those aged 25 to 34.
More than a quarter (27 per cent) of that age group are worried they may have problems getting a mortgage approval later in life because of poor credit history, low income or on the basis of age.
Commenting on the results, BSA’s head of mortgage policy Paul Broadhead explains the factors currently influencing the market and sounds a few notes of hope for borrowers as building societies can provide them with more flexibility and this means more options. He said:
“We are all now living much longer and getting on to the property ladder later in life. Many younger buyers are realising that they may not be able to pay off their mortgage until after they retire. As the average age of a first-time buyer increases, borrowing into retirement is becoming the ‘new normal’, rather than a niche form of lending.
“The Mortgage Market Review, introduced just over a year ago, has had an impact on borrowing. The application process is much more rigorous and borrowers now have to contend with strict affordability assessments that factor in other commitments. This means they may have to borrow over a longer term to secure a mortgage.
“These demographic and regulatory changes mean some borrowers may find their mortgage application is rejected if they need to borrow into their anticipated retirement. The mortgage market needs to change to cater for this shift in borrowing.
“Despite the concern shown by younger homebuyers, it isn’t all doom and gloom. The building society sector tends to be more flexible and willing to offer mortgages that extend into retirement. Some societies do not have upper age limits, tend to take the case-by-case approach to applications and are keen on developing long-term products that cater to first-time buyers who may want or need to borrow into older age. The sector is also keen to debunk the myth that once you are over 40 you are ‘too old to get a mortgage’.
“Given that the population is aging and house purchase later in life is more common, the Government, regulators and the financial services sector needs to cater for this change. Paying off a mortgage by the age of 65 is no longer a reality for many.”
