A UK mortgage provider this week announced that they are set to trial a 55+ mortgage designed for older borrowers in the summer. The oldest applicant can be 85 years old! Whilst some predict that this is likely to cause a major shift in the mortgage market, others are calling the product irresponsible. Here we point out the reasons why lending up to age 95 is not a practical mortgage model.
At a recent meeting on longevity cross subsidy risk, two points were raised that make for interesting reading. Firstly, it was claimed that more than half the delegates in the room would more than likely live beyond 100 years old. Secondly, it was the fact that the first person who would live to 150 has already been born.
Whilst we are living longer, attitude to risk has to take the reality of old age into account. Taking out a mortgage in in your pension years has always been difficult, even for those with a guaranteed final salary pension income. But with good reason. How many of us would rather embrace our later years without the burden of debt and the transfer of debt to their children or other family members?
The impact of taking out a mortgage in later life could impact your family’s inheritance after your death, your ability to pay for care should you need to, and even limit your future borrowing and home moving opportunities. The decision to offer such a product will start to set the precedent that borrowing such huge sums of money in later life is a perfectly feasible option when the realities of it are far from it.