Lending into retirement – common sense prevails

07:44 Wednesday 26th November 2014
BBC Radio Cambridgeshire

DOTTY MCLEOD: House prices in parts of Cambridgeshire are simply out of reach for many first-time buyers, and now there’s a warning that those who wait too long to try and get a mortgage might find their options limited. A report from the Intermediary Mortgage Lenders’ Association warns that fears of a future clampdown by regulators is preventing mortgage lenders from offering loans that stretch into people’s retirement. So could anyone over 40 wanting to take out a standard 25 year mortgage find themselves turned away by lenders? It’s a worrying thought. Vicky Stubbs is Head of Risk at Cambridge Building Society. Vicky, is it harder to offer a mortgage to people who are in their 40s? Are they going to come into trouble?
VICKY STUBBS: I think with everybody, regardless of their age, what we want to make sure is that they can afford their mortgage, and that they can make repayments over the life of the mortgage. What we do, having the advantage of being a small building society, is look at individual circumstances. So if you have people in their 40s, often people are now not retiring at 60, not retiring at 65, so the first thing you do is have a sensible expected retirement age. Somebody at 40 can still be working easily for another 25 years. Similarly up to about 45. And then you want to talk through their retirement plans, talk through what they’ve done in terms of pension planning, what they’ve got set up so far. And just make sure that they have plans to continue to repay the mortgage. We don’t expect somebody at 40 to have a pension that is fully paid up, ready to pay a mortgage at the age of 65, because clearly they can have another 25 years of saving towards the pension. But what you want to make sure is that people have got pension arrangements in play, people have thought about it, and people are thinking about how they’re going to continue to pay for that mortgage once they are retired.
DOTTY MCLEOD: It seems so unfair Vicky, because the reason that people are having to wait longer to try and get a mortgage is because they’re having to save up the deposit for so long, because wages aren’t necessarily that high and house prices are.

VICKY STUBBS: Yes. And that’s why we try and look at everybody individually. We’ve seen house price inflation, house prices going up, particularly around central Cambridge, but we try and help people buy their houses across East Anglia. And we will try and look at individual circumstances and see how we can work with customers, whether it’s just even taking one or two years off the term of the mortgage, or talking through fully their retirement plans. And if we can talk through what they’ve got in place, then it can well be actually there’s something that is acceptable to us and we can still make a mortgage. We do look at it and there aren’t many mortgages that we feel we need to turn down because people are taking the term too long. We just want people to make sure they can enjoy their retirement and have the money to pay the mortgage if that’s what they choose, or do other things if that’s what they prefer, and that people have just really thought about it. But we want to help people buy their own homes and we will look at what we can do to support that.
DOTTY MCLEOD: So all hope is not lost. That’s Vicky Stubbs, who’s the Head of Risk at Cambridge Building Society. Vicky, thank you for coming on this morning.